With market conditions changing, the effect of the Banking Royal Commission and property prices fluctuating in some states, the lending landscape has changed significantly over the past 12 months.
With banks and other lenders placing more scrutiny over lending applications, Loan Market’s State Director Tim Amorous provides insights into how to keep your financial fitness high, ahead of applying for property finance:
“It’s recommended you talk to your broker as early as possible. Loan Market brokers are trained to understand the requirements of banks and how these apply to a multitude of individual circumstances,” Mr Amorous said.
“Having a copy of your credit report is highly recommended. Credit reporting has changed significantly since the introduction of Comprehensive Credit Reporting (CCR) mid-way through this year. Your Loan Market broker has the experience to navigate the options for your unique circumstances and a broad panel of lenders to select from. You can download your report for free or talk to your broker to help arrange this.
“Lenders will want to ensure that you’re not only able to pay your loan back, but will look for evidence you can live within your means and save a little before you commit to a large purchase such as a new home.
“Your savings history could be in the form of accumulated deposits over time, a larger deposit that has been in your account for over three months, or in some cases, your rental repayment records over the past 6 months. Different lenders have different criteria on how they assess savings so it’s important to talk to your broker early about how they will view your unique circumstances.
“This is usually overlooked, but a great way to save on fees and charges is to roll all of your accounts into one. Not only does this save you money in the long run, but it also allows you a single view of your incomings and outgoings.
“Having a budget you can stick to is crucial when taking on property finance. Be realistic about your expenditure and build in contingencies. Also consider indulgent purchases, holidays, and ensure you allocate a suitable amount for living expenses. Lenders like to see people living within their means.”
Mr Amorous said with banks and other lenders placing a stricter protocol on lending, they will go through the past 3-6 months of financial transactions with a fine-tooth comb.
“We’ve seen scenarios where too many purchases from a bottle shop or withdrawing money from a casino has had an adverse effect on a bank’s desire to provide finance,” he said.
“Look for savings where you can. Always try to compare things like car insurance and energy bills and moving debts into consolidation. This also extends to your bank, many have new customer offers, so shopping around does pay.
“The key is to remember a property is the biggest investment you’re ever likely to make. And with financial institutions tightening their belts regarding finance, it’s vital your financial fitness is in the best possible shape.”
Ray White CEO New South Wales Blue and Auctioneer Jason Andrew said buying at auction is still a great way to purchase property, but having the correct finance in place is critical to success.
“I’ve conducted around 25,000 auctions and it’s been a privilege to make the dreams of so many come true, whether it’s a first-time buyer or seasoned bidder,” Mr Andrew said.
“But the reality is without the correct finance in place, or without finance at all, the property dream will remain just a dream.
“It’s so important to arrive at auction with all your ducks in a row, be honest, don’t take risks with your finance and great things can happen.”