In order to demonstrate you have made a reasonable attempt to calculate servicing, multiple calculations may need to be made. These can include but are not limited to the Mercury Borrowing Capacity calculator and Lender Servicing calculators.
As per ASIC guidelines, please use these calculations with other sources to get a reasonable estimate of servicing ability.
Are all lenders in the Nexus Borrowing Capacity calculator?
You will find few lenders are not included in the results when performed Borrowing Capacity Calculation in Mercury. The reason for this is, some lenders have not requested NextGen to enable them to be reflected in Mercury in search results.
Connective updated calculations in the Borrowing Capacity Calculator
Rather than relying on third-party providers, we’ve been re-building our own servicing engine to create lender-specific calculators that consistently deliver accurate results.
The following lenders have been switched to the new servicing engine:
- Bank of Melbourne
- Connective Essentials
What's the difference between the existing calculations and those performed by Connective?
Existing lender calculations are performed by NextGen and displayed in the Nexus Borrowing Capacity calculator.
Calculations performed by Connective have been matched with the lender calculators themselves and are within $ accurate over a number of scenarios.
In the updated borrowing capacity calculator there are a number of columns. These columns contain information that was previously bundled together in the comments column. There has also been new columns added that apply to only the calculations performed by Connective.
New Columns added to the Service Results
Product Rate, Buffer and Assessment Rates
The existing calculations use a generic product within NextGen + base rate to calculate the assessment rate.
Connective calculators use the actual product rate + 3% (buffer) to calculate the assessment rate which is more accurate than the generic product.
When compared against the lender calculators themselves Connective calculations are within $ accurate.
Living Expenses vs. Total Expenses
For all lenders you will notice changes to the Living Expense column and the addition of the Total Expenses column.
Living Expenses =
- for calculations performed by Connective this column will list HEM for each lender
- for calculations performed by NextGen this column will show the NextGen returned expense value - this is no different to what is currently being displayed
Total Expenses =
- for calculations performed by Connective this column will total the basic living expenses compared against HEM and taking the higher of the two + additional living expenses + existing loan repayments
- for calculations performed by NextGen this column will total the NextGen returned expense value + additional living expenses + existing loan amount
Negative Gearing =
for calculations performed by Connective negative gearing on assets listed as investment property (both proposed and existing investments) and uses the ownership percentage of the asset to apportion the tax deduction.
- for calculations performed by NextGen the Tax Benefit percentage will be used.
- Monthly surplus = amount remaining after loan and expenses have been paid. (This column is hidden by default, but it can be added to the display by ticking it on in the column preferences)
Borrower(s) DTI (debt to income ratio)
The existing calculators don't take in to consideration DTI - Debt to income ratio. For calculations performed by Connective we have added the Borrower(s) DTI column.
- Borrower(s) DTI = DTI % for lender calculations performed by us
When hovering your mouse over the DTI ratio the DTI Policy will be available.
Future Update! In the next release we will be expanding the DTI policy in a larger slide-out window that will also include Income Policy.
Takes the DTI ratio and compares it to the lender policy. Hovering over it will display the lender-specific DTI policy:
- If the DTI ratio is within the lender's policy the status will appear green.
- If the DTI ratio is outside the lender's policy the status will appear red.
- If the DTI ratio is not within policy, but there may be further actions that can be taken the status will appear orange. It is advisable you contact the lender in this case.
Max Amount Status
Takes the loan requested amount (as determined by asset value and LVR) and compares it to the lender's max amount:
- If the loan requested is below the Max Amount, the status will appear green.
- If the loan requested is above the Max Amount, the status will appear red.
Looks at the status of DTI ratio and Max Amount:
- If either the DTI or Max Amount is red, the servicing status will be red.
- If both the DTI and Max Amount are green, the servicing status will be green.
- If the Max Amount is green and the DTI is orange, the servicing status will be orange.
New fields within the left-hand input panel
Investment Real Estate Asset
When an investment real estate asset has been selected, the two following fields will be available.
- Investment Cost = is not mapped to the living expense 'investment property cost' but is essentially the same thing
- Frequency = frequency of investment costs
How to add a Borrowing Capacity Calculator to an Opportunity
From the Calculations section click Add
You can also create Borrowing Capacity calculations in the Research Application.
From the Borrowing Capacity section open a new tab to create a new Borrowing Capacity calculation.
Before you start your Borrowing Capacity Calculation
Please make note of the following:
- The Borrowing Capacity is calculated using a loan term of 360 Months (30 Years) and P & I. All calculations are an estimate only.
- The Issues Icon ( ) will appear if there is a discrepancy between the result displayed and the lender's calculator, i.e. changes in HEM Tables. You can find out what the issues are, if you hover your mouse over the icon. Like this;
To calculate negative gearing on an existing investment property, kindly use lender’s serviceability calculator for accurate results
- Enter all figures as Gross.
Why Mercury Borrowing Capacity Calculator Assessment rates are high comparing to lender serviceability calculator?
Lenders uses a default product and its variable rate for serviceability calculations in Mercury Borrowing Capacity calculator.
Whereas in lender serviceability calculator, you can choose the product and the rate of your choice.
Lender Serviceability Calculator
Assessment rate = [Product Rate of your Choice + Buffer]
Mercury Borrowing Capacity Calculator
Assessment rate = [A default Variable rate + Buffer]
How to do a Calculation
- The below screen will appear
- Enter the basic loan details
- Click the button to add a new Person.
- Use the drop-downs to add Income and Expense items
Note: You can override the Living Expenses for the applicant. If the expenses are lower than the lender's amount, their amount will be used.
- Enter the Real Estate details in the Assets section by clicking the button.
- To add Rental Income for a future Investment property or Investment property being refinanced. Just add a New Asset and select Investment and Purchasing. The existing mortgage fields will be removed. Just add the expected rental income amount and frequency.
Click on Calculate Servicing Amounts and the results will populate in the right hand panel.
- Only Real Estate that is not marked as 'To be purchased' or 'Clearing from this Loan' on the opportunity will populate here.
- 'Use as Security' is used where the existing property is being included as security with the new application.
- The 'Use as Security' option will increase the Borrowing Capacity results as per the lender calculation.
- When 'Use as Security' is checked, 'Clearing' will be automatically checked as it assumes a different lender and clearing. However it can be unchecked if it's currently the same lender and not to be cleared.