Applying for a mortgage can be daunting and confusing for some, especially the first time. Information and background can be required and who is best to talk to?
REDnews asked Squirrel Mortgage Adviser, Lindsay Hill, the recipe for a successful home loan application.
Hiding information or non-disclosure is a big no-no, so make sure when applying you put your full financial position on the application form. Banks can access systems that tell them what credit facilities (credit cards, expensive short-term debt-store cards, hire purchases etc) you have, and if they discover you haven’t disclosed any debt facilities it will make getting finance harder.
Pay down your debt
If you have $50,000 of credit card debt, and a deposit of $25,000, questions will be asked about whether you’ll be able to afford your new home loan. Keep your debt to a minimum and the bank could review your loan application a lot more positively.
Make sure you’ve run a budget before applying for a loan to help you determine whether you can afford not just the loan, but the other costs that come with owning a property (rates, insurance, maintenance etc).
One of the things the bank considers before lending you money is if you can afford to meet the proposed loan payments.
To demonstrate this, you should consider saving regularly the difference between your current rent and the proposed loan payments. Not only will this demonstrate that you can afford the loan but you’ll be helping to prove to yourself that you are ready to buy a house.
You could also look at taking advantage of any special savings and home loan packages that are available.
The Reserve Bank has put LVR ‘speed limits’ in place for banks so that no more than 10% of their new lending can be for those with deposits of less than 20%. This means banks can still lend to you if you don’t have a 20% deposit as long as they have not reached their capacity allowed by regulation.If you have a 20% deposit, it is likely to be much easier to get a home loan.
Even if you don’t have a 20% deposit, you might want to consider discussing the possibility of using a parental guarantee to help get you to a 20% equity position.
Make sure you take advice from independent advisors at all stages of the house buying/home loan process. This can include your lawyer, a mortgage adviser, authorised financial adviser, tax adviser, insurance broker, building inspector and registered valuer.
Looking for a new home?
Westpac has handy tips, info and mortgage calculators to help: