Change is in the air as the royal commission is getting closer to finalising its report. A part of the fallout is that going forward there may be more challenges for buyers in obtaining finance due to new policy requirements. It should be noted that approval time is also taking considerably longer. One thing that will remain the same is banks looking at the stability of your income and your current financial commitments. It’s a worthwhile exercise to make sure your house is in order.
Financial commitments include:
Credit cards. If you have a credit card and do not use it, banks consider this as a mini-loan as you could potentially spend up to the limit. Because of this, any credit card limit you have will reduce how much the bank will lend.
Personal loans, car leases, HECS-HELP debt. Banks see personal loans as what your current repayments are and assume you will be paying the same amount for 30 years, even if the repayments will end in six months time.
Spending habits/living expenses. Nowadays, more and more banks will be requesting to see your bank transactions and, typically, would lend the amount they feel is fit for your lifestyle. Banks seem to be taking an interest in how much you spend on things like school fees, Uber Eats and restaurants.
In short, the less financial commitments you have, the more lenders will generally lend you and vice versa. If lenders see that your financial commitments are well controlled, and your employment/income is stable, they will find you less likely to fall into financial stress which is the last thing anyone wants. Always seek independent financial advice if you wish to reduce any of your financial commitments.
Getting a fully assessed pre-approval through your bank or a finance broker before you purchase is best practice. This means that:
– The lender has approved the loan amount
– You know your budget
– You now know what type of properties in the relevant suburb you can search for
– You can bid at auction or make an offer with confidence
Information courtesy of Paul Woon (Finance Broker) Finlink. If you require assistance, Paul can be contacted on 0433 282 582 or firstname.lastname@example.org.