If things weren’t already hard enough for First Home Buyers to enter the market things have just gotten harder.
APRA (The regulator of our banks) has just conducted a review of the banking sector and the message from APRA to the banks is that they want the banks to make getting a loan harder not easier.
While I think most borrowers perceive lenders to be fairly similar APRA found significant differences in how lenders access borrower’s ability to make payments. APRA found it was not uncommon to find some Banks lend 50% more than the most conservative lender.
As a first home buyer, you may have decided to buy an investment property due to not being able to get into your own home where you live due to the cost of housing.But unfortunately it is going to get harder here as well. Some lenders currently accept 80% of the rental income to use for serviceability (taking 20% to allow for cost such as rates etc) while others are only accepting 50%.
This can make a huge difference to your borrowing capacity. It is no wonder that they can be such a big variance in what one lender will loan you compared to another. The bad news going forward is that the lenders covered by APRA are required to tighten their lending guidelines.
As you can see above, not all lenders are the same and choosing the right lender is essential. The good news is that while APRA regulates the authorised deposit institutions (ADI’s), other lenders are not covered by APRA’s tough stance and may be able to help you with more sensible lending solutions.
At Mango Home Loans, we strongly believe in ensuring borrowers are being assessed to ensure they can ultimately repay their loan without undue hardship. However, the current regulations, as well as individual bank policies regularly take away the ability to have a common sense approach. Everyone is different, people have different savings and spending habits, and their ability to repay a loan is very personal.
Know what you can afford – complete your own budget and get a full understanding of the cost of home ownership, such as rates, water and maintenance. Work out how much you can afford in repayments and then speak to a broker to work out your borrowing capacity.
Speak to a broker, not a bank.
We have been helping Australians get into their own home since 2004. But with us it is more than just helping you get a loan. Getting a home loan is a great first step but even better is having the right strategies to get out of debt even faster.
We have helped people right across Australia get into the property market. What sets us apart? It is the strategies we can implement to help you pay your debt off faster.
The average loan in Australia is refinanced approximately every 3 years. This tells me that most people are probably in the wrong loan to start with. Most people also fail to pay their loan off over a 30 year period and instead are continually refinancing to pay for things like car upgrades, furniture and holidays. As a first home buyer if you make the right decisions now you can be in a far better position then your neighbours are in 10 years’ time. Studies completed in America found that there were significant differences in the net worth of retirees. What they found was it didn’t matter the level of income people were on, the biggest impact was their spending habits.