Getting a home loan used to be so easy but it can now be a frustrating experience and you can thank our Government for that. They’ve placed a lot of pressure onto our financial system to remain strong and transparent, and there have been casualties and consequences as a result.
10 things that have changed
1. You’ll need to provide more documents
Lenders will be looking into all nooks of your life and you’ll have to provide all paperwork and more associated with your soon-to-be loan, current living expenses and any debt you currently have. It’s more than just two pay slips and a drivers license. They’ll most likely even give you more paperwork to fill out and return.
2. The lender will ask more questions
Gone are the days where the lender will ask you simple questions like how much you earn or what debt you currently have. These days they’ll delve into much more complex questions to find out about your spending habits to best determine whether or not you can repay your mortgage. They’ll even ask about your future and whether or not you’ll have dependents or if you have a back up plan if something were to happen and you couldn’t continue working.
3. Applications take longer to get approved
It’s not as simple as a stamp on paperwork anymore. There are more hoops to jump through and processes to follow to ensure that everyone is covered (you, the lender and insurers) if anything were to go wrong and you couldn’t pay back your mortgage. This is simply because you’re now providing more paperwork and there’s more people looking over your application.
4. Your living expenses will be scrutinised
Is fine wining and dining your thing? You’d best stop that now. The lenders can go as far back as the last 12 months to access your spending habits and where your money goes. Ubers, subscriptions and any other unnecessary/non-essential spending should be put on hold if you want to get your loan approved.
5. Don’t expect the banks to use common sense
If you don’t provide all information or can’t be transparent during your application you can’t expect the lender assess you correctly. They’ll assume on certain parts which can eventually end up not working in your favour.
6. Your borrowing power will be lower
After all the paperwork and questions, the lenders will still add a buffer. This is to safeguard both you and the lender because if they mortgage you out at your maximum borrowing capacity and something were to happen, you’d potentially default on your loan.
7. Investment loans are more expensive
This is due to the fact they not only attract larger interest rates and fees but the risk associated is greater.
8. Interest only loans are on the way out
Especially for investors, if Sydney and Melbourne’s property markets are anything to go by and with APRA watching the lenders every move, it will be very hard to come across an interest only loan.
9. Your retirement age may be assessed
The older you are, the harder it might be for you to get a loan. Especially if you don’t come up with a larger initial deposit. Most lenders will look at your current age and the age that you may retire and deem the time span unacceptable as most loans are for a 30 year period.
10. Overseas borrowers will find it harder
It’s now harder to get overseas money into Australia so any international buyers will find it difficult to purchase, regardless if the property is a house and land package or apartment.
This is affecting people from all income levels and you need to be more diligent when applying for a loan and going through the right lender.
The outlook for the remainder of 2018 ……. it’s not going to get easier to get a home loan.