Ray White Upper North Shore

Finance update I spoke to Damien Page from Loan Market about how the fallout from COVID has affected lending. What are the key challenges that buyers are facing at the moment when it comes to obtaining finance? Covid-19 has caused the big four banks to tighten their lending criteria, however they are still open for business and have tailored policies for affected industries and impacted incomes, such as those who are self-employed or rely on commissions or overtime. Application processing times have increased in general and buyers need to expect that there could be a few more hurdles to step through. What might buyers be unaware of that can influence the ability to get finance? The three things that seem to surprise buyers are: 1. Banks assess credit cards based on the limit, not on the amount owing. It’s a common misconception that you need to have credit cards to get a home loan; this was the case 20 years ago but is no longer applicable. Credit cards are just another form of revenue and can work against you when applying for a home loan. 2. Banks check your last 3-6 months of savings and transactional account conduct to ensure you are saving and not spending on things such as gambling. They also look at much you spend per month on discretionary items, as many buyers underestimate how much they spend per month. 3. Zip and Afterpay; these are becoming common and can be considered high risk by banks, showing that clients are living outside their means and going into short term debt to purchase discretionary items. It calls character and spending habits into question. For upsizers, are there any key challenges to be aware of, such as bridging finance? Banks have significantly different policies regarding bridging finance. Some lenders require clients to be able to afford both home loans at once, while others capitalise the interest and base the debt on what is left after your existing property is sold. Speak to a broker who can look at your situation and provide options as it can be complex. How much time should buyers allow for finance approval if they are looking to buy a home in the next 3- 6 months? Generally, pre-approvals take 1-2 weeks depending on the lender, but I recommend leaving as much time as possible to allow for potential processing delays. Get pre-approval in place before attending open homes as they last for up to six months. How would you recommend buyers set their budget for their next home purchase? The best way to find out how much you can spend on a home is by talking to a mortgage broker. Banks not only look at how much additional income you have after expenses, but they also factor in contingencies in the rates and buffers on debts. During Covid-19, some lenders have stopped using income outside of base income, others have not. A broker can step you through this. Q Q Q Q Q