Tighter Guidelines for Mortgage Lenders
People often find it difficult to negotiate with banks or any other financing companies because of their policies and many requirements. Some lending rules have changed because of various reasons; a good example would be the economic crisis. Everyone could be a victim of economic change. Small, medium or large scale businesses can never escape an economic crisis. Entrepreneurs affected by the economic crisis seek help from banks, and other financing companies in order to generate cash. Mortgage lenders help people keep their businesses alive. But because of the new lending rules, mortgage lenders find it hard to attract loan applicants. As a result, mortgage lenders have had to change their lending guidelines, for security reasons of course.
Mortgage lenders have implemented the following changes:
- No discount offers – Good payers who acquired more than one loan are often offered by their mortgage brokers with discounts. Discount rates as negotiated by mortgage brokers start from 0.5% -0.75% which is lower than the regular rate. This is no longer applicable. Before you give in to this discounted offer, it is best to talk with your mortgage broker.
- Loan-to-valuation ratio is 80% – Most investors would borrow 80% of the property’s purchase price. The remaining 20% must be funded through savings deposit or in form of another equity. This is ideal for those who have equity or those who were able to fund the remaining 20% by savings. Some will take the property out by mortgage insurance. But how about those who cannot fund the 20%? It somehow discriminates those who cannot afford. Those who intend to borrow beyond 80% will find it difficult to negotiate because of the tighter lending guidelines.
- Stop lending on property to SMSF’s – Lenders sometimes apply lower loan amounts to self managed super funds or SMSF’s unlike loan-to-valuation- ratio. They even charge higher interest rates. Under the tighter guidelines, mortgage lenders are advised against lending on property to SMSF’s.
- Increased stress-test starting point (from 5% – 7.5%) – Lenders and banks want to test if you have the capacity to pay. It will be increased from 5% – 7.5% of the home loan rate. It serves as a stress test to see if you can pay once the interest rates rise.
Mortgage lenders want to secure their business from risky loans. This is why they refined their guidelines. Mortgage lenders will provide the money that is equal to the value of your property. It may be 80% of the actual value or it can go lower than that. It is best for you to consult property advisers or mortgage specialists before applying loans. We have experienced mortgage specialists to help you find the bank, financing company or private lender to match your needs. Borrowers are encouraged to seek for advice to save time rather than going around by themselves which is very time consuming and not to mention tiring. If you are in need of lending assistance, then our mortgage specialists are willing to help you find the right lending option for you.