Another week, another change to lending practices that will offer more hoops for buyers, sellers and brokers to jump through when it comes to financing or refinancing their home or investment property.
The latest changes? Where Casual employment had been considered reasonably favourably, the 3 month minimum employment period has now increased to 6 months for some lenders, meaning those that have changed jobs recently might now have their earnings discounted when it comes to borrowing – a big factor when it comes to determining your borrowing power and likelihood of success.
For a number of lenders, its not just the amount of time you have been in a job, but it’s the type of job (and more importantly, the type of PAY), that can determine whether you get a yes or no. For those on a straight salary or full time across your 38 hour (!) week, its pretty straightforward. For those where significant overtime or commission plays a big part though, be prepared for some banks to discount this amount in their calculations. Why would they do this? After all, its real money, its what you’ve been paid, right? Well, banks are in the business of managing risk, and while you might have a consistent history of that overtime or commission, “past results are not a guarantee of future performance” and with nothing set in stone to say you’ll continue to earn that extra money, lenders will look to hedge that bet.
If you own existing investment properties and are counting the income from those in your calculations, guess what? That’s right, with some parts of the country experiencing higher levels of unemployment this is another area where lenders are being a bit lean on income – allowing for either longer periods of vacancy or even reduced rent in the current environment.
I haven’t had much positive to say so far, have I? It’s not all doom and gloom – there ARE more hoops to jump through but interest rates ARE incredibly low and different lenders will have different risk profiles so just because one bank says no (or maybe, or yes BUT), it doesn’t mean that they all will. This is the time to be talking to your broker about what options are best for you and your circumstances to help get across the line. And while you wait to find out – keep saving!