Obtaining Finance During COVID -19
The lending landscape has changed in Australia during COVID-19. If you are considering taking out a new mortgage, this article will provide a summary of some of the things you should expect when applying.
Covid-19 has created some economic uncertainty in some businesses or industries. This has understandably made some lenders more cautious when assessing home loan applications.
However, you can still qualify and borrow just a much as you would have been able to before the Corona Virus. What you will need to expect is additional checks and requirements when you apply for finance. Mainly the following:
- More rigorous employment checks – Lenders will want to make sure the income you are currently receiving is current and ongoing. So, at the time of application your proof of income will need to be less than 14 days old and may require further updates during the home loan process. If you are currently receiving Job Keeper – some lenders may not allow this to be used in the calculations.
- Tighter income tests – Different calculations are now in play for any bonus income, commission income etc. If you are self-employed you will now be asked for not just the last two years tax returns but also the most recent BAS statement. Financiers want the most current and up to date information they can receive. Any rental income that you receive has also been reduced for calculation purposes.
- Caution around certain industries or types of work – Most lenders exercise caution when it comes to industries that are susceptible to the impact of COVID-19. For example – tourism, hospitality, gyms & fitness and entertainment sectors. Lending is still possible – lenders will just require additional information.
- Lower LVRs – Traditionally lenders allowed up to 98% lending for owner occupiers to enable them to either purchase or build their homes. That has mainly been wound back to 95% (although there are still two lenders available at the top end). If you are self-employed, in areas that may be hard-hit or surrounding industries that are affected by COVID-19 it have been reduced to a maximum of 80% or even 60% to avoid Lenders Mortgage Insurance.
- Longer approval times – COVID-19 has impacted the efficiency of many lenders. Just as it affects all other businesses. Many employees are working from home and added pressure from customers seeking COVID-19 assistance or relief. This has resulted in some lenders to have a wait time of up to four to 6 weeks for an application to be processed. So please be patient and have all your documents ready as quickly as possible to ensure a smooth application. A pre-approval may also be advised ahead of finding your perfect property.
So, although the process of lending has become more cumbersome, lending during COVID-19 is pretty much the same process and is subject to the same checks, albeit a little more like a forensic audit…
Lenders doors are still open for business. The best way to navigate through that process as well as all the stimulus that is available is to make sure of a mortgage broker. If you want to look at your personal circumstance – contact me on 0418 903 954 or
email firstname.lastname@example.org and start your process.