Getting a mortgage out of a bank is getting as hard as fermenting wine in a gumboot!
Naturally, with house prices and interest rates dropping, we have an increasing number of clients wanting to buy property. Frustratingly, the banks keep tightening credit criteria because (1) they don’t have enough funding to meet demand and (2) they are nervous about losses, given the state of the economy.
What worries me is that we have people on good incomes that can’t buy (because the bank won’t lend to them) and people that need to sell (but can’t find buyers who can borrow). These issues will push down property prices, and higher bank losses will be a self fulfilling outcome!
Getting a mortgage has become a lot harder, especially if you are a property investor, self-employed or have little in the way of a deposit. If you are a mortgage broker, real estate agent or builder, you’d have better luck with the gumboot!
Banks are only lending over 80% now to exemplary clients – truly! If you are over 80% and even slightly rough around the edges then forget getting your mortgage through one of the banks.
We do have other options. The secondary market is starting to fill the void. We have lenders that can go up to 95%, but it costs more, and by the time we’re finished the paperwork you will feel like you’ve been pulled through a combine harvester backward. (We did a 95% lend on an Investment Property today with an 80% first mortgage and a 15% second. The all up rate will end up at 6.20% with no low equity fee).
The days of banks throwing money at us are long gone. In fact, we are almost back to the old days where you had to go cap-in-hand to the bank to literally squeeze money out of their vice like hands.
The banks are single-mindedly focused on verifiable income, which is the biggest issue for Property Investors and Self-Employed people where often the “cash-flow” does not stack up. There are a large number of Property Investors that cannot buy because they do not have the servicing ability (at least based on bank calculations). When assessing you, banks will only use 75% of rental income and will not allow tax loss benefits to be included.
