Nicole helps ??? a divorcee get a new property

Dear Nicole,

I am recently divorced, sharing custody of two primary-school-aged boys. I am at the point of trying to get a home loan/pre-approval. How much can I borrow? I saw NAB today to run through a pre-approval as they have my property settlement at the moment but wondering if there is a website or someone you would recommend as to getting the best home loan rate. Money is going to be a tight issue for me so I want to get the most out of it and hopefully a little house that I can call my own.

Anita, Frankston

No doubt this is a very daunting time for you Anita ??? but it's also very exciting.

Before you get too relaxed and comfortable with NAB - let's call that Plan B in case you struggle to get approved without a history with another institution - you need to know there are probably hundreds of cheaper loans.

I'm assuming your settlement means a chunky deposit. Anything over 20 per cent could unlock the best rates on the market (and will save you from one of the biggest rip-offs in finance: lenders' mortgage insurance).

The key will be your income - or more specifically, uncommitted income. A prospective lender will want to know all your money in and, crucially, out.

This allows what's called the serviceability calculation and, to stop people from over-borrowing, the regulator recently enforced a minimum interest rate buffer. The test is (the higher of): could you afford it if rates went up by 2 percentage points (so eight times) or if they reached 7 per cent?

Banks are now supposed to apply this "stress test" for you ??? but to double check they're not putting you in a too "tight" money situation, jump on the repayment calculator at moneysmart.gov.au, input a 7 per cent interest rate and play with the loan amount until repayments come down to a level you think you can afford. Sanity check yourself by making sure this is no more than one third of your salary each month ??? and that's how much borrowed money you can safely add to your deposit.

Just don't forget you'll also need to keep enough cash for costs like stamp duty - typically about 5 per cent of your purchase price.

Where to find a loan? Free comparison websites are falling over themselves to help. One of those with the most loans listed is Canstar. Just be sure to first use the dropdown menu to filter results by interest rate rather than Canstar rating, and to uncheck the "Yes, only show results with links" box - that's how they pay the bills.

You'll be a home owner again before you know it, Anita!

Nicole Pedersen-McKinnon is a money educator and consumer advocate: themoneymentorway.com. You can write to her for help solving your money problem, or with a consumer question, at nicolehelps@fairfaxmedia.com.au.

This story Nicole helps ??? a divorcee get a new property first appeared on The Sydney Morning Herald.