How Do Banks Check Dependant on Home Loan Application Sydney?

October 31, 2022
Mortgage Brokers vs. Banks

If you are in the property market for a new home, you’re probably thinking of getting a home loan. And the most common question from first home buyers—how do banks check dependant on home loan application Sydney? 

When applying for a home loan, the bank will need to know who your financial dependents are. This helps them assess your capacity to repay the loan. There are a few ways they can check this information, so it’s essential to be prepared

In this article, we bring you all you need to know about dependents meaning, how banks check dependents, the average home loan in Sydney, and much more. So, keep reading.

What are dependents?

Before we jump onto the answer for how do banks check dependant on home loan application Sydney? Let us first understand who dependents are.

In simple words, a dependent is someone who relies on another person for financial support. In most cases, they are your children.  

However, there may be a few situations in which an individual can be considered dependent. For instance, a disabled spouse or elderly parent may also be considered a dependent. 

Regardless of the specific situation, dependents can significantly impact loans. When applying for a home loan, lenders will often take into account the number of dependents an applicant has. This is because dependents typically add to an individual’s financial obligations.

Therefore, it is highly crucial to consider your dependents when applying for a mortgage. If you have multiple dependents, you may need to save up a larger down payment or look for a less expensive home in order to get approved for a loan.

How much does a child affect your borrowing power?

How Do Banks Check Dependant on Home Loan Application Sydney

Adding a child to your family can significantly impact your finances, including your borrowing power. This is because lenders will consider your dependents when assessing your ability to repay a loan for Sydney real estate.

Now you must be wondering what does the bank check when you apply for a mortgage? The lenders will simply look at your debt-to-income ratio when you apply for a loan. This is a measure of how much of your income is going towards debt payments. 

Another way how do banks check dependant on home loan application Sydney is if you have children, your debt payments are likely to be higher. That is due to the additional costs of childcare and other expenses. As a result, you may have less money available to put towards a loan, which can impact your borrowing power

Therefore, it’s important to factor in the cost of raising a child when you’re planning to apply for a loan. By doing so, you can ensure that you’ll be able to find the best loan for your family’s needs.

We also advise you to be aware of the first time home buyer grants in Sydney, as they can help you in assessing your advantages if you’re buying a home for the first time

How do banks assess living expenses?

How Do Banks Check Dependant on Home Loan Application Sydney

While applying for a home loan, one of the things lenders will consider is your living expenses. They’ll want to make sure you’ll be able to comfortably afford your mortgage repayments, as well as all your other costs of living. Most lenders will use the Household Expenditure Method (HEM) to do this.

The HEM is a national estimate of the average living expenses for families of different sizes. It’s based on Australian Bureau of Statistics data and is updated regularly to ensure it stays current. Lenders will compare your living expenses to the HEM for your family size and use the higher of the two when calculating your borrowing power.

That’s why it’s important to give a realistic estimate of your living expenses when you’re applying for a home loan. Consider all of your monthly payments carefully while taking your time. This will help you get an actual estimate of your borrowing power.

How much can I borrow with dependents?

Now that you’re aware of how do banks check dependant on home loan application Sydney, you need to know how much money you can borrow if you have dependents. 

The answer depends on several factors, including your income, your dependents’ ages, and your state of residence. In general, you can expect to borrow more if you have dependents than if you don’t. 

Thus, the best way to find out how much you can borrow with dependents is to speak with a lender about your specific circumstances. They will be able to give you a more accurate estimate based on your situation.

What if I don’t declare dependents on a home loan application?

How Do Banks Check Dependant on Home Loan Application Sydney

If you are thinking about not declaring dependents on mortgage application in Sydney, you should know that there can be serious consequences. You could have your loan application rejected outright. 

Additionally, you may end up on a ‘black list,‘ which would make it difficult to obtain a loan in the future. In worse cases, the bank could recall your loan, and you could even face fraud charges

So while not declaring dependents may seem like a way to save money on your mortgage, it is simply not worth the risk. Be honest and declare all of your dependents to avoid any potential problems down the road.

What is the average home loan in Sydney?

According to recent data by the Australian Bureau of Statistics (ABS), the average loan size fell from $609,000 in July 2022 to $589,000 in August 2022.

There are several possible factors that have contributed to this trend. First, interest rates have fallen to record lows, making borrowed money cheaper to service. Second, borrowing conditions have eased, making it easier for people to obtain finance. 

Finally, wage growth has been strong over the past two years, giving people more disposable income to put towards a home loan. As a result of these factors, there is a significant reduction in the average loan size across Australia.

Need more financial advice? 

Browse our finance category. It’s chock full of hacks and advice from industry professionals. And remember to download the Soho app for quicker browsing and property matching. It’s getting you into your dream home faster!

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