It’s no secret that the Australian Government is tightening the finance sector’s belt, with the recent Royal Commission taking no prisoners. As a result, lenders are under pressure to comply strictly with ASIC regulations, which means it may become harder for borrowers to take out a home loan.
Although it is good that lenders are under greater scrutiny, it also means conditions for securing a loan could change significantly.
With this in mind, we’re offering our top tips for securing a home loan.
#1. Get the right evidence
This one may sound easy, but you’d be surprised at how many borrowers find it difficult to locate their financial data. If you have an accountant or finance advisor, hit them up for support and make sure your tax returns are in order.
Your mortgage broker will tell you exactly what financial information you’re likely to need, depending on the lender that is right for you. Some lenders require 2 years worth of tax returns; others only need one pay slip to evidence your earnings.
A lender wants this information to determine your capacity for repayments, now and in the future. Ultimately, it’s important that you are able to meet your regular repayments without stress.
#2. Reduce your debt
Where possible, reduce the amount of debt owing on your credit cards, and pay off any existing loans you have in your name. Of course, this sounds easier said than done. If you’re having trouble paying off debt, consider speaking with a qualified financial advisor. They will help you put together a strategy for paying off the debt, which will take you much closer to your goal of securing a home loan.
If you have multiple outstanding loans or debt, the advisor may recommend consolidating it into a single loan with lower interest and more attractive terms. There are ways to achieve your goals, especially with the right support.
#3. Speak to a good mortgage broker
We recommend speaking with a financial advisor to reduce your debt. And, we recommend speaking with a good mortgage broker for support with completing a home loan application. A mortgage broker understands how to fill out an application effectively. He or she will also ensure you have the right supporting documents, so your application has every chance of success.
#4. Know your budget
The success of your mortgage application will depend largely on whether a lender sees you as high or low risk. If you’re applying for a loan outside your repayment capacity, you are far less likely to secure it.
This is simply because a loan that is beyond your repayment capacity is of greater risk to the lender. Make sure you ask your mortgage broker to run the numbers, and work out what you’re able to spend.
Your mortgage broker will not only look at your income and existing assets, but also your living expenses, and other factors that impact what you’re able to repay. With this in mind, they will recommend a repayment amount within your budget.
Being smart about buying a property will pay off in the long run, as you will have a sound investment that you can handle on a month-to-month basis, while also living the amazing life you are supposed to live.
Be patient with your strategy and surround yourself with people who have your best interests at heart.