Deposit – The banks will ask a few questions around this. They want detail on where it came from. Did you save it, sell something, tax return or was it a gift? How long have you been saving it for? If you didn’t save it, do you have to repay it? Genuine savings versus non-genuine? Different banks have different policies with varying criteria on what constitutes genuine savings. What is genuine with one bank is not considered genuine with another.
Employment – Full time, part time, casual, PAYG, contract. How long have you been in your current job? Did you move jobs but stay in the same field? Do you have two jobs?
Depending on the bank will depend on their policy around the employment type and the associated length of time you need to have been in that role before they will accept the income derived from it. This goes for second jobs as well. Banks need to be satisfied that the two roles are sustainable long term. Some will accept 100% of second incomes while others may shade the income to 80%.
Servicing – How much do you earn versus how much you spend! Now I understand that you currently pay $600 per week rent and can therefore clearly afford the new home loan repayments that are $480 per week but…….. the banks all have their own servicing calculator and if we can’t get a green tick then they won’t accept it. The banks don’t go off the current interest rate, they put loadings on top to stress test your capacity and provide comfort that you will be able to manage if rates were to rise. Again, different banks place different loadings. Some will also load all other expenses even if they’re fixed such as personal loans, credit cards and other investment lending. This can heavily reduce your borrowing power depending on the banks you apply with.
Exit Strategy – How are you going to pay out the loan? Will you be working until the end or even beyond the end of the loan? If so, you won’t need to show an exit strategy as it is assumed you will simply pay off the loan by the end of the term.
If however you are anywhere from 45 up (again depending on the bank), you will need to provide a valid exit strategy and downsizing isn’t always an option. Strategies must be able to be validated, so if you’re relying on an inheritance, you need to be able to show this. If it’s superannuation you may need to provide an expected growth chart. Other ways can include using other investments that you will sell to pay out the debt once you retire.
You can see that lending is much like a puzzle where you need find a bank that matches your deposit position, your employment length and type, your expenses and your exit strategy to a bank. It can be a challenge and sometimes it can take a bit of time and research before you find it.
If you have any questions or want to run your situation by me, feel free to call 0410413196 or email me at email@example.com