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Need a new home loan?

For well over a year now, we have seen a significant credit tightening. To make a strong case in a mortgage loan application, there are a few things you can do to assist. Here’s our list of what you can do to make the strongest case possible and increase your chances of a loan approval.

Do your research and shop around
Make sure you research rates through traditional banking channels and mortgage brokers to find the best rate possible for your financial situation. Remember securing a loan isn’t always about the interest rate. With credit tightening for property investors, your Loan to Value Ratio (LVR) will be crucial in determining your interest rate. To calculate your interest rate, the lender will divide the amount of the loan you require by the value of the property. Naturally, the greater the LVR, the higher the risk you represent to lenders. This will change the array of loan products available to you.

Pay down personal debt ASAP
To improve your credit rating and overall financial position, paying down personal debt should be your first priority. Paying down personal debt frees up your income which puts you in a stronger position to service your property finance.

Decrease and closely monitor discretionary spending
It’s been widely covered that lenders are now looking at applicants discretionary spending habits as part of the loan application process. For at least a few months before you submit a loan application, aim to decrease your discretionary spending on things such as restaurant meals, Uber Eats, clothing, consumer products and other discretionary lifestyle expenses.

Refinance a current loan
If you’ve had a Principal Place of Residence loan for at least 5 years, you may be able to refinance your current balance over a new 30 year period. This will reduce your repayments, freeing up more of your income to service a loan on a new investment property.

While it can be discouraging to get knocked back for a loan, remember it’s not an uncommon occurrence in the current credit market. Being proactive about strengthening your financial position, budgeting and putting yourself in the shoes of lenders and brokers will help you make sure you present yourself as a desirable loan applicant.

If you would like any advice on buying or selling or need an up to date market value of your home or investment property, please contact us at any time on 4902 7222.

We look forward to catching up with you.

Natalie

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