Getting a home loan used to be a relatively easy process. However after the Royal Commission, and now with Covid-19, lenders have made significant changes to lending policies and the way they assess a client’s application. As a result, are you finding it harder to get a home loan? Our partner lender, Approved Lending discuss the changes below.

Approved Lending & Hill & Viteri Property

A number of these changes include:

Income:

• You will now be required to provide more paperwork to evidence your income
• If you are earning overtime, commission or bonus income lenders are now reducing the amount they are willing to consider. Previously most lenders would use 80% of this income. However some lenders are now considering as low as 60% and, in some cases will not accept it at all.
• For rental income lenders previously would use 80% of the weekly rent, however a number of lenders are now only using between 60%-70%

Lenders are accessing income types in all different ways. It is important that you are lodging with a lender who provides the strongest assessment of your individual position.

Suitable Security:

• Recently, all lenders have identified certain postcodes which they deem to be higher risk than others and have placed further restrictions in these postcodes including:
• Not willing to lend above 80% of the property value
• Rarely accepting rental income in certain postcodes
• If there are a certain number of units in the complex or a certain number of levels, not accepting a residential unit as security

It is important to understand whether the lender you are considering will accept the security you are offering. Otherwise the application may be declined. Simply because the bank has deemed the property you are offering as an unacceptable security.

Living Expenses:

• All borrowers are now required to declare their living expenses when lodging an application for finance.
• As a result, the bank will compare your declared amount with their minimum expense amount to determine the expense amount they will use for the assessment.
• In addition if you lodge with a lender that requires you to provide bank statements with the application they will compare your declared expense amount against your recent spending habits.
• Certain expense types are treated differently from lender to lender including private health insurance, investment property expenses and private schooling fees.

Based on your declared expense amount and type, the borrowing capacity from one lender to the next can be significantly different. Your financial position living expenses are a big part in determining the most suitable lender/s for your application.

Your Retirement Age:

• Only a few years ago, the banks would approve a 30-year loan to a 60-year old client without any hesitation
• Now, they consider your retirement age and whether you can repay the loan before retirement
• If the loan cannot be repaid prior to retirement then you will need to provide an exit strategy. Common exit strategies include:
  – Using superannuation to repay the loan balance on retirement
  – Clearing the remaining debt by selling an investment property
  – Selling your owner-occupied property and downsizing

The issue that borrowers face is each lender has determined what types of exit strategy they deem acceptable. If you apply and present the wrong strategy your application could potentially be declined.

Are you having trouble getting your home loan approved?

As a result, all borrowers should be contacting a qualified mortgage broker when looking to obtain finance.  Not only to have access to a range of products and interest rates.  They can show which lenders will approve their loan application.  This will be based on their unique financial position.

If you would like to have a chat regarding the options available to you, please feel free to get in contact with us on 9545 2220 or by clicking here. We can refer you to our trusted partner, Approved Lending. They have helped our clients and staff achieve their real estate goals.