Have you heard that home loans are now hard to obtain? Well, things are now more difficult, so you need an expert in your corner to help your loan sail through the application process. Here are a few tips to help you be in good stead.
The bigger your deposit, the more attractive you are to lenders. Whilst some banks will lend to you if you have as little as a 5% deposit, you will be limited with which banks you can go with and will have little power to negotiate a lower interest rate. You will also potentially avoid Lenders Mortgage Insurance (LMI) if you contribute 20% of the purchase cost which can be a massive one-off expense.
‘Interest only’ terms hit fever pitch back in June 2015 when an astounding 46% of new home loans written were interest only. All lenders were forced by the government to reduce their interest only loan books over the last few years so, meaning that lenders ask a lot more questions and make the application process harder if you aren’t wanting to pay the principal on your loan back initially. You will also find that the interest rates for ‘Principal and Interest’ loans can be much lower, thus resulting in potentially lower repayments.
Banks are now looking at up to 6months worth of transactions in your everyday accounts line by line to make sure that what you have listed as your expenses are accurate. Start cutting your spending habits and not only will you will look good on paper for your application, but you may also just realise that all those micro-transactions really are draining your bank balance and find new ways to increase your deposit.
When assessing your application for a home loan, banks take into account your credit card limits. Whether you use the cards or not, they assume your cards are all maxed out and that you are only making minimum repayments. Your credit card limit may dramatically limit how much you can borrow (known as your ‘serviceability’) for your home loan, so cut the cards up now or at least reduce your limits dramatically long before you plan on submitting a home loan application. Every situation and lender’s assessment is different, however we recently had a client who found that for every $1,000 limit on their credit card, meant a reduction on their home loan borrowing potential by roughly $4,000.
Need help to action any of the above? Contact us today.
*This information is general in nature and does not take into consideration your individual circumstances. Please contact us for further information.