Getting a loan has become harder and harder – make no bones about it, and rates and terms you may have been given less than 12 months ago, today might see you not been able to borrow at all! So the following tips are to ensure you present your best foot forward to a lender and understand, this is nothing personal, everyone is in the same position, regardless of wealth or ease of application.
Respond when asked quickly – Help us Help you! The quicker you get us the extra information, the easier it is to get things finalised for you. It’s amazing how often lenders are asking for extra details now. Speaking to a credit officer last week he said that previously they could use a certain amount of common sense but no longer. Now 99% of loan applications get asked for extra information.
Make Full disclosure – no forgotten credit cards or furniture loans just because they are interest only that you think don’t count. Also, no forgotten children– they really do count! Lenders are checking your family benefits and they usually know better than you will, what you are entitled to per child.
Make all your payments into and out of your accounts on time – lenders are reviewing THREE FULL months of your savings account that your pay is deposited into and possibly six months of your credit cards. Do not make late payments and expect to refinance as lenders don’t want you if you can’t pay your bills on time. Of course if you are in trouble with your repayments of certain debts, there are lenders that will help, but they will charge you a premium.
Explain all items on your payslips – particularly any voluntary payments to super that are discretionary or when you make deductions to different accounts to other banks – all will need explaining. Any allowances as well as bonuses – we need all payslips showing the bonus and PAYG summaries for two years.
Keep your Living Expenses as low as possible – Lenders are assessing all living expenses and adding investment property expenses to your normal living expenses so keep them down (even if you are managing easily on your income) for three months prior to applying for a loan. If it appears you overspend or even carelessly spend, you may be refused a loan. A young man I heard about recently had a loan at only a 50% loan to value ratio refused, although he serviced the loan easily, due to regular items for online betting coming from his savings accounts. So think like someone who is lending you money and do not appear careless.
Buy investment properties that have better returns – Note all investment and interest only loans are more expensive than owner occupied loans so be mindful about keeping your rent return as high as possible to help you cover this debt easily. Up to 40% of loans were interest only but this has now reduced to 15% as people are not prepared to pay such a premium as often now when converting from IO to P&I (Principal and interest) allows you to sometimes be paying the same actual amount in monthly repayment but you are including principal.
Borrow as much as you can as early in life as you can then pay it back – some accountants have been known to give the advice that it is better to remain with interest only loans, particularly on businesses and investments but what can happen as you get older is:
- As you get older, you may find it harder to refinance for extended periods, as lenders become increasingly more focused on your exit strategy.
- You may run out of time to pay loans back and end up with lots of debt in retirement and this is a miserable position to be in when you are tired and old and simply wish to wind down and relax.
- Property investment works best when it is allowed the time to grow. People still expect everything will flourish instantly but you can be sure if you sell a property, it could double in value the following year or two and that is the voice of experience writing to you!
Now more than ever, lending is a complicated business and deciding on the right lender for your circumstances can be harder than ever but know that WE are here to help.
Quote of the Day:
“You don’t have to be great to start, but you have to start to be great”.— Zig Ziglar