A new guide helps borrowers avoid home loan train crashes.
Splashing on the high life too regularly can jeopardize any buyers’ hope of securing a bank loan, warns a leading New Zealand mortgage expert.
“Spending money unnecessarily makes lenders nervous,” says William Laban, managing director of mortgage advisory firm Loan Market. “If people have a thing for things like Uber Eats, restaurants, or designer clothes, it’s time to cut back on spending if they want to buy, because such habits can bury the chances of getting a mortgage. “
Loan Market – which operates 150 franchises across New Zealand and underwrote $6 billion worth of mortgages last year – has launched a Buy Ready guide for potential borrowers with tips and advice aimed at increasing the chances of a lender says yes to an application.
“It helps prepare people when they approach a bank. We find that nine out of ten people don’t have a budget and just walk into a bank with a wreck of bank statements on a hope and a prayer hoping to get a loan,” Laban said.
“With stricter lending criteria these days, it doesn’t work that way anymore. Banks will ask pretty probing questions and often you only get one chance.
“They’ll want to know about your personal finances, including your savings history, credit history, employment, and more,” he says. “Having your ducks in a row has never been more critical because we’ve seen too many people fail to get a loan for these reasons.
“But, that said, lenders don’t expect people to live like frugal hermits; they just want to know that you’re not splurging too much on the high life. If your living expenses are reasonable and the numbers are what you want to borrow, so it’s fine.”
Laban’s comments come amid falling home lending across the country since the government introduced stricter lending terms under the Responsible Lending Code late last year to protect vulnerable borrowers from predatory and irresponsible lenders.
Annual growth in home loans fell after the code took effect, falling from 11% in November to 8.1% in April. Although the government has since relaxed the rules of the Credit Contracts and Consumer Credit Act (CCCFA), banks are asking it to relax them even more.
Laban says the Buy Ready guide — which Loan Market likens to pre-season training to get homebuyers in shape — isn’t just for first-time homebuyers or those with less money. experience. It is also useful for people looking to update their existing family home or considering getting into real estate investing.
He says tougher market conditions, the changing landscape of inflation and interest rates, changes to lending regulations including new rules for investors, tougher LVRs (loan to value ratios) and some lenders implementing their own debt-income ratios (DTIs), may sound like another language.
“A lot of customers don’t understand what some of these changes mean. Ultimately, preparing for a mortgage loan is a complex process that takes time and the sooner you start, the better. The days of showing up to a lender and getting approved, no questions asked, are gone.”
Laban says one of the first things Loan Market does is help potential buyers with their budget. “Most lenders will review everything you do and review accounts for three months before an application.
“Watching expenses and getting the books in order before applying for a mortgage is more important than ever,” he says. “This includes settling all credit card debt and outstanding loans and checking bills; any declined payment is a giant red flag for lenders and getting the finances under control early can save people disappointment and heartache. “
Laban says the Buy Ready guide contains five key tips that not only cover account management, but also advice on how much people can afford to borrow, an explanation of how the deposit process works and how much will be necessary, budgeting and why it is beneficial to speak with experts before going to the bank.
Laban says the company is well placed to help potential buyers. “We are New Zealand’s largest mortgage originator and work with a wide range of lenders to secure home loans to around 12,000 customers a year.”
To learn more or download the buying guide, go to https://www.loanmarket.co.nz