It’s no secret that the Australian Government is tightening the finance sector’s belt, with the recent Royal Commission taking no prisoners (especially among the Big Banks).
As a result, lenders are under pressure to comply strictly with ASIC regulations, which means it may become harder for borrowers to take out a home loan.
Although it is good that lenders are under greater scrutiny, it also means conditions for securing a loan could change significantly.
With this in mind, we’re offering our top tips for securing a home loan.
This one may sound easy, but you’d be surprised at how many borrowers find it difficult to locate their financial data. If you have an accountant or finance advisor, hit them up for support and make sure your tax returns are in order.
Your mortgage broker will tell you exactly what financial information you’re likely to need, depending on the lender that is right for you. Some lenders require 2 years worth of tax returns; others only need one pay slip to evidence your earnings.
A lender wants this information to determine your capacity for repayments, now and in the future. Ultimately, it’s important that you are able to meet your regular repayments without stress.
‘Mortgage’ stress is simply not worth the negative impact on you and your family’s life.
Where possible, reduce the amount of debt owing on your credit cards, and pay off any existing loans you have in your name. Of course, this sounds easier said than done.
If you’re having trouble paying off debt, consider speaking with a qualified financial advisor. They will help you put together a strategy for paying off the debt, which will take you much closer to your goal of securing a home loan.
If you have multiple outstanding loans or debt, the advisor may recommend consolidating it into a single loan with lower interest and more attractive terms. There are ways to achieve your goals, especially with the right support.
Never be afraid to ask independent finance professionals for support. Ask around, look at reviews on Facebook, and build a team around you.
We recommend speaking with a financial advisor to reduce your debt. And, we recommend speaking with a good mortgage broker for support with completing a home loan application.
A mortgage broker understands how to fill out an application effectively. He or she will also ensure you have the right supporting documents, so your application has every chance of success.
Most importantly, they should pinpoint a home loan that matches your goals, and saves you more over the entire term. At Capita, we research and tailor a loan that aligns with your objectives.
Often, this means recommending more obscure, niche lenders, who in some cases have more attractive terms and rates than the Big Banks.
The success of your mortgage application will depend largely on whether a lender sees you as high or low risk. If you’re applying for a loan outside your repayment capacity, you are far less likely to secure it.
This is simply because a loan that is beyond your repayment capacity is of greater risk to the lender. Make sure you ask your mortgage broker to run the numbers, and work out what you’re able to spend.
Your mortgage broker will not only look at your income and existing assets, but also your living expenses, and other factors that impact what you’re able to repay. With this in mind, they will recommend a repayment amount within your budget.
Stretching your budget is never a good idea, and no good mortgage broker should ever encourage you to do so.
We know buying a house is an exciting time. But, it’s important that you don’t rush into the process. Make sure you have good people around you – including a financial advisor and a mortgage broker.
If you’re not quite ready to secure a loan, your mortgage broker will advise you on what changes need to be made to get you there – whether it’s lowering debt on your credit cards or taking the time to secure another tax return.
Being smart about buying a property will pay off in the long run, as you will have a sound investment that you can handle on a month-to-month basis, while also living the amazing life you are supposed to live.
Be patient with your strategy and surround yourself with people who have your best interests at heart.
We can help you discover whether you have the capacity to pay off a home loan, based on your finances, circumstances and your goals.
Our brokers have access to hundreds of loan products, and our home loan service is free of charge. * Get us on your team. You won’t regret it.