What is a Lenders / Banks ‘Assessment Rate’ and why is it so important? The majority of us know that we are at a point in time where interest rates are at record lows – thereby, it’s easy to assume that means finance is also easy to obtain. This internal rate can make the difference between a loan approval and a decline and it can differ significantly between lenders. The ‘Assessment Rate’ is very different to the actual or advertised rate that you will be paying assuming the loan is approved. It can range anywhere between 2.5% - 3.5% above the discounted rate (that’s advertised or successfully negotiated) Its purpose is to stress test a borrower’s cash-flow against potential rate rises in the future. In other words, will you still be able to repay your lending commitments, maintain lifestyle and your living costs and have a surplus if rates were to rise rapidly and your income source remained unchanged? This ‘assessment rate’ is a key due diligence when choosing a suitable lender, product and structure.
Posted on: Wed, 03 Sep 2014 13:07:24 +0000
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