Anyone who has recently applied for a loan to buy a home may have noticed that it is no longer as easy to get finance as it used to be.
Banks and other lending institutions have realised that in recent years they had been making it too easy to borrow money. As a result they were left with borrowers who could not repay loans, and borrowers who were suing the lender for providing finance in circumstances where they really should not have.
The banks and other lending institutions lost credibility and money as a result of this behaviour. The media has recently reported some cases of individuals on very low incomes with poor capacity to repay having big loans approved that were doomed to fail.
In one example, A couple earning just $90,000 a year with four dependent children were lent more than $900,000 to buy two investment properties in a Queensland mining town only to be bankrupted after they were unable to meet the repayments. That couple were commencing legal proceedings against the bank alleging among other things that the bank should have known they could not afford the loan. (Was Westpac irresponsible or the customer? Courts to decide – Angus Grigg, Financial Review, 17.9.18)
If you make an application for finance, expect to provide full detail and documentation about all of your assets and liabilities and income and outgoings. Expect the lender to ask lots of questions, request numerous documents, and take some time to finalise your application. If you can’t really afford to borrow the money, or more money, the bank may not agree to lend it to you.
Most importantly, don’t commit to buying a house or investment property until you have written finance approval. A ‘pre approval’ from a lender does not always result in a loan offer. Entering into a contract without final finance approval can be disastrous if you are unable to get the finance to complete the purchase.
Speak to Baldock Stacy and Niven about your purchase and the finance approval process. We have been helping clients finalise their real estate purchases for over 100 years and we know how to get you through safely and efficiently.