New home loan customers can expect more hurdles before getting an application over the line.
While all four of the country’s biggest banks have offered mortgage repayment holidays for their customers, all new home loan customers can expect more hurdles before getting an application over the line as lenders have tighten their lending criteria as a response to Covid-19.
Even if you’re not in a hard-hit industry, home loan applicants can expect extra requirements before credit is approved.
Biggest impacts are as follows:
Covid-19 Hard Hit Industries
Certain lenders have flagged hospitality, aviation and the tourism industries as higher risk. Verification of income and employment of applications in these industries are tightly scrutinised to ensure the applicant’s role and income hasn’t been affected.
High LVR Loans
As property prices Australia wide are expected to fall, banks are reluctant to take on High Loan to Value (LVR) loans. Loan greater than 90% will be difficult to qualify for unless applicant’s income and employment history are particularly strong.
Rental Income
Rental Income policies have been tightened due to Covid19 related uncertainties in rental market. Rental income previously assessed at 80% is now 50-60%. Short-term accommodations such as Airbnb no longer acceptable to most lenders.
Self-Employed
If you are self-employed, most lender will not allow you to get mortgage insurance. You will need to have 20% plus cost.
Verification of business income is also more stringent. Additional to the 2 years’ financial history, up to date BAS and trading statements will be needed to ensure that business is still operating.
Non-Base Income
Non base income types such as Bonuses, Commissions, Allowances etc. are all reduced to 60% assessment.
Application processing times are also delayed as shutdowns have affected turnaround times overseas.
Who is not impacted by these income assessments?
Borrowers working in essential services, which include health professionals, emergency service personnel, corrections officers and police are exempt from changes to provisions relating to acceptable income types.
If your income is certain, i.e. if you work for the government, unaffected industries such as IT or a booming industry, then the next few months are likely the best time to invest.
This is good news for those that meets the above requirement, lenders are now offering historically low-interest rates on fixed-rate home loans, with Owner Occupied rates as low as of 2.19% p.a. and Investment starting from 2.44% pa.
How can we help?
As part of a broker network of over 1700 brokers with access to over 45 lenders, we understand the changing lending landscape better than most.
In the short term, getting approved is about mitigating the risks to the lender.
We do this by providing extensive notes for a strong case, extra income evidence and by understanding which policies, each lenders are flexible on and more importantly, where they’re not.
If you would like our assistance and want to know if you qualify for a loan, email your specialist Finsure mortgage broker Yvonne Bedford using the contact form below.
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