Hey all, i got some play time, so i want to throw up an issue that i have been thinking about for a while when it comes to finance…
I personally think the banks (and some non bank lenders) are very unfair with their criteria when it comes to financing property… let me explain…
First of all, why are banks so anal about work history?? who has got a fone call 2 years into a loan, asking for 2 more pay slips to show that your still working for the same company??? yet a just graduated uni student starting a new career is usually told to come back after a year or 2 (for a 25 or 30 year loan)… not very fair when you can get a loan, and quit your job that it was based on, the next day without anyone really caring….
Why are people who run their own business usually hit with a higher interest rate… i dont believe there should be any discrimination between self employed ppl and people who work on a wage or salary, as long as you pay the loan… again, you could get a loan, quit the job, open your own business and no one will really care, as long as you make the repayments…
Why, does a higher credit card limit lower your borrowing power??? after all, a high limit is gained by being a good customer, making your repayments, and maintaining your good credit history? you shouldnt be punished for earning a high limit over years of careful spending and repaying… (hands straight up.. who has had to lower their card limit to satisfy the loan criteria.. i was told i need to drop $4k of my card for a $300k loan.. what a joke!!!) (yet they gave me over $100K into a bank account as a redraw.. i could hav went out and got a sports car.. and blown the rest away on crap…but that 4 grand on the CC was a issue according to them)
Why are casual jobs and part time jobs not taken as income, yet my rentals are?? i was told casual jobs are not permanent… not once was i ever asked for a lease agreement, many a time i had tennents renting week by week, as their lease had expired… the lenders didnt really care, many times i changed tennents half way through a loan application, if i apply 1 week and its vacant then its seen as vacant for the term of the loan??? Again very un fair!!!
I can go on and on… i know people working casually (by choice) making $1200 plus per week (teachers and nurses especially), and cannot get finance, they were even given “advice” to register themselves as a business by some non-bank lenders to get a low doc loan… what a joke!!
I think if u can get 20%, show that u got it by saving, then you should not be given hoops to jump through, if u stuff up, you lose the place, simple as that…., you lose your job, you try to get another one, common sense!
Anyway… i would be interested to hear what people think, or if they have had similar problems / thoughts…
Jason [
]Jason,
I don’t disagree with much that you are saying at all. Add pensions to your list. Disability and single parent pensions are more secure than most jobs but many banks won’t allow them!
Couple of points though…
A higher credit card does equal a higher monthly comittment to a fully approved LOC. This reasonably affects affordability of repayments.
Some mainstream bank lenders are pretty comfortable with casual income provided some length of time in the same industry can be demonstrated.
There are LODOC loans cheaper than standard variable rates out now.
Cheers,
Simon Macks
Mortgage Broker
[email protected]
0425 228 985Comments may not be relevant to individual circumstances. If you intend making any investment, financial or taxation decision you should consult a professional adviser.
Hey Jason,
I often hear people say that it is harder,if not impossible,for self employed to secure finance.But my experience has been somewhat easier…..I have been self employed in the building industry (the stability of which fluctuates wildly),and yet I have never bene knocked back for finance for my home,car,two IPs etc…I don’t know if it is that I have been with this one bank all my life,all myaccounts are with them,including loans and business accounts, and they can see exactly what I do with my money.Or maybe it is just that my business banking manager is a good bloke!
Tools
TeasherK6….There are many inaccuraices in your post but let me offer some advice.
If you can’t get a loan in the current lending enviorment then you have one of two problems:
1) you are speaking to the wrong broker
2) you are dead.As for regsitering as a small business it is so they can get you a cheap lodoc loan and the loan made to you will be outside the Consumer Credit Code and therefore the mortage insurer will go easier on the applicltion, in fact one of the LMI companies will not do lodoc that is inside code.
As for your comments regarding the lender not wanting to see the lease agreements …that is pretty typical..they assume any house can be let quickly if the price is right. If it empty when you apply they can still estimate what a fair market rent would be.
As for your thoughts on “if you stuff up you lose the place” …a few facts to consider. There are a number of lenders who will lend you the money with no questions asked if you have the deposit (an asset lend)…however they charge accordingly as they can’t be certain that you will ever make a payment as they don’t know how much you earn. Plus don’t forget the bank does not stop a reposseing the house if you stop payment. They have the legal right to persue you personally for any balance that may be owing after the house is sold …..therefore they need to get a bit of feel for what risk they ar facing. Likewise they don’t like reputation risk …this is where they lend to somebody on a pension or similar and then have to evict them. The current affairs shows can turn this into a bank bashing sob story quicker than you can boil an egg.
Don’t fight the system…just navigate thru it.
Teache,
didn’t know about the credit card limit thing! I am hearing you. It is like the lower income earners getting huge tax breaks, incentives etc without paying much tax and so much for all getting the baby bonus.Kramer
[8D]I’m Kramer
Serenity Now!Nat R,
Im just curious as to the many inaccuraices i have mentioned? my comments were based on my own experiences, i also did my fair share of “navigating” trust me on that! im 24 and have 6 purchases and 1 sale under my belt thus far.
You are right about brokers however, i wish i knew about the services they offered when i was first starting out. but as i mentioned my comments were targeted to banks and the non bank lenders out there, and the fact that so many people making alot of money still have to navigate to get a loan at times.
I still think it is an unfair system, sure a business is registered, and they have means of getting loans using their ABN, but 3 times i was asked what was my main source of income, by certain lenders, and i said property investing. then i was told, without an ABN i could not borrow with them as this was their rules. And i still STRONGLY feel that a person working in a good job but as a casual or temp/part time should not have to register themselves as a business to satisfy a loan requirement.
“As for your comments regarding the lender not wanting to see the lease agreements …that is pretty typical..they assume any house can be let quickly if the price is right. If it empty when you apply they can still estimate what a fair market rent would be. “
This was an interesting comment, i never knew of a lender to speculate (if i understood what you said) on the possible income of a vacant property and then use it as literal income on a loan application?? (any brokers out there please step in to verify if this is common practice??) this just highlights what i was saying about some of the contradicting requirements of getting a loan.
NOTHING in this life is certain, only that if your born then eventually you will die. Anything in between is luck, circumstance, etc etc etc. Why i say this? because a bank or lender usually wants proof of working in a “permanent full time job” over the term of the loan. thats all good and well, but whats the definition of being employed permanently and full time? Are you imune from getting sacked? is the company imune from going broke? Are you then protected from having a very bad accident and god forbid not being able to work ever again?? all these things could happen in an instant, therefore a lenders emphasis (in my opinion) should be based on a persons ability to produce income, not how long or how often they work at the same place over how many years! work climates change, if you dont want to sink, you adapt to the change.
Sorry to sound morbid, my intentions were not to bank bash, but to highlight some of the issues i and many people i know have faced when applying for a loan.
I also dont want this to turn this into a verbal slanging match, i look fwd to peoples comments, good or bad, just dont let it get nasty and at gutter level. i mention this because all of you have seen what an innocent question can turn to in other posts! (MortgageHunter, where were you when i needed you!, and what bank looks at casual pay, just curious!)
Thankyou and good night, i mean morning!
Jason [
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