What is Net Income Surplus – and why it changes your ability to loan

Net income Surplus (NIS) – Can you get a loan?

We’ve covered this briefly – however, these are the basics

Lenders, banks or a broker will complete the following steps

Step 1

1️⃣ aggregating all sources of income (including rent on properties the borrower owns)
2️⃣subtracting living expenses, interest and principal payments on the new debt
3️⃣subtracting the servicing costs of any other debt the borrower may have

For example, you PAYG statement shows you earn $5,000 per month after tax. If you are joint apply – its the total of both your incomes.

For your living expenses, it will include groceries, utilities, phone, public transport/car, and entertainment. It will also include rent if you are currently paying it.

In Sydney or Melbourne – the below are very rough estimates

Living cost in Australia for one person: $2,835 per month
Average living expenses for a couple: $4,118 per month
Average monthly living expenses for a family of 4: $5,378

To continue our example, lets say our $5000 earner is a single person in Sydney, with the above expenses (including rent). His NIS is $2165 per month

Step 2

A percentage of the NIS will be the available monies for a loan. These are not published, but a prudent estimation would be 30% of NIS on the low side and up to 35% of your total monthly income on the high side.

In our example, it would be reasonable to estimate $757.75 per month would be available to our single person on Sydney, up to $1750.00 per month.

Step 3

In the above example, that ranges a loan from $175,000 to $350,000. That’s quite a range!

Check our other articles to understand what would influence these amounts

 

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