High net worth borrowers generally earn more than they spend, which is obviously a great thing – but it can also be a double-edged sword.
Why? Because it can impact your ability to get finance.
Find yourself complaining that you never have enough time?
Does your ‘To Do’ list grows every day, but you barely seem to tick things off?
Are you running between work, gym, family and other commitments like a hamster in a wheel?
If any of this sounds familiar, you could benefit from having a broker help you get your finances and loans organised.
Why Do High-Income Earners Need Help to Get a Home Loan?
Borrowers with high incomes can find themselves spending more than they need to because they can afford it.
They don’t need to check how much they’re paying for their internet service or shop for the cheapest groceries because their budget can afford it.
An extra $20 here and $50 there isn’t worth worrying about for you, the way it might be for someone living week-to-week on lower wages.
Where this can cause problems is when you want to apply for finance.
In fact, high-income earners can have a lot more trouble than they thought they would when they try to secure finance.
This is because with a high income comes high disposable expenditure – something banks don’t like at all.
So, What Can You Do About It?
The first step is to work out what you’re spending right now, and if that amount could be considered “too much” in the eyes of the bank.
But What’s “Too Much”?
Here’s the thing: lenders generally assess your spending using Household Expenditure Measure (HEM). This formula gives the lender an amount as a guide that the average person spends…
In your location (the HEM varies depending on the city you live in)
With your family size (it changes based on how many kids you have)
Your income (lenders assume a higher income means higher spending)
By figuring out how much it should cost you to live, the lender can look at your salary and determine how much you’ll have leftover to service the loan.
Lenders assess your spending against the HEM, and if your spending is way higher than the HEM guidelines, it can show up red flags.
Let’s say, for instance, you’re a couple with one child living in Sydney, and you earn $250,000 combined.
The HEM threshold might suggest spending of around $5,000 per month. But your actual spend is $9,000 per month.
The lender might view your spending habits as reckless, as they exceed the HEM by a large margin… and that’s not someone they want to loan hundreds of thousands of dollars to.
This is where an experienced mortgage broker can help.
We can help you adjust your spending habits, to become a little more lender-friendly.
Don’t worry, you won’t be living on baked beans and toast. But you may need to reign in some of those recurring, non-essential expenses for a few months, so we can help you produce bank statements that reassure your lender you’re a good ‘credit risk’.
We help you restructure your debt.
You might also have large credit card limits thanks to your income, which we may need to reduce. Many people don’t realise, but even if you only owe $100 on a $20,000 card, the lender will assess this card as though it’s fully maxed out – bringing down your borrowing capacity. You can always bump the limit back up again down the track if you need access to more credit.
We help you find the best lender for your specific situation.
Every lender has a different loan policy, criteria and appetite for risk. As experienced mortgage brokers, we can assess your situation and help match you with a lender who will be most likely to approve your loan, as their policies suit your situation.
For every problem, there is a solution, and with our depth of knowledge and experience, we can help you move through these obstacles and become “finance ready”.
The bonus is, you’ll probably save quite a bit of money in the process, and our service is 100% free for you, as we’re paid by the lender. Speak to one of our friendly team members and get the ball rolling on your loan application today!
Zippy Financial is an award-winning mortgage brokerage specialising in home loans, property investment, commercial lending, and vehicle & asset finance. Whether you are looking to buy your first home, refinance or build your property investment portfolio, the team at Zippy Financial can help find and secure the right loan for you and your business.
About the author:
Louisa Sanghera is an award-winning mortgage broker and Director at Zippy Financial. Louisa founded Zippy Financial with the goal of helping clients grow their wealth through smart property and business financing. Louisa utilises her expert financial knowledge, vision for exceptional customer service and passion for property to help her clients achieve their lifestyle and financial goals. Louisa is an experienced speaker, financial commentator, mortgage broker industry representative and small business advocate.
Louisa Sanghera is a Credit Representative (437236) of Mortgage Specialists Pty Ltd (Australian Credit Licence No. 387025).
Disclaimer:This article contains information that is general in nature. It does not consider the objectives, financial situation or needs of any particular person. You need to consider your financial situation and needs before making any decisions based on this information. This article is not to be used in place of professional advice, whether business, health or financial.
Many borrowers are complaining that banks are slow to process pre-approvals. Why is this happening? Is there anything you can do to speed up your pre-approval?
A home loan pre-approval means that a lender has agreed, in principle, to lend you a specific amount of money towards the purchase of a property. But they have not proceeded to a final or unconditional approval yet.
Getting a home loan pre-approval is an essential prerequisite to getting serious about looking for a property to buy. It will give you the confidence to buy as you know your limits. It can also allow you to bid at an auction with a set budget in mind. Overall, it helps give you a budget to shop within and give you the peace of mind of knowing if your offer is accepted, you are very likely to be approved for a home loan.
What do you do now that pre-approvals have become difficult to get?
The pre-approval shortage
The issue is that many banks have stopped doing pre-approvals. They have taken this action because they have been so overwhelmed with demand and they have not had the resources to service potential new borrowers.
The banks that have continued to proceed with pre-approvals have had to take on extra volume, which is making their response and turnaround times a lot slower than usual.
Driving this home loan demand has been the record activity the market has seen by active first-time buyers. Low interest rates have also meant that existing homeowners have been refinancing for a better deal than they have.
Furthermore, the super low interest fixed rates have encouraged a massive amount of people to apply to fix their rates.
Some banks have got themselves into a sticky situation during covid and lockdowns as they have staff overseas in bulk call centres such as India and the Philippines. These regions have been hit hard by the pandemic and in turn, put an enormous amount of pressure on banks as they tried to equip staff to work from home in offshore countries. This has contributed to the slower service levels.
In some positive news, some banks have since decided to bring their credit departments back to Australia, but it has been a lengthy process of recruiting and training – so not an immediate solution.
This can explain the why. But if you are one of the unlucky borrowers who has applied for a home loan and are slow to get approval, you can miss opportunities to buy at an auction, secure a deceased estate or take action on a property for sale by motivated sellers who want a quick sale.
If this sounds like you, and you do not want to pay more than you need to in a rising market, time is of the essence. Getting a fast pre-approval can happen, and here is what you need to do:
1. Be organised and prepared from the outset. This means getting all your paperwork organised including your payslips and tax returns.
2. Do not start looking for a property until you have got your pre-approval. If you find your dream home, it can add pressure as you will feel compelled to act fast and make an offer, but this can add a lot of stress to the process.
3. Work with a mortgage broker that understands efficiency and speed. If you delay getting all the documents to them, they are hamstrung and your application can’t progress.
4. Ask your mortgage broker to do the research for you. Good mortgage brokers have exceptionally good systems and good relationships with banks and their credit managers, so they can find you a bank that best suits your needs and has the fastest turnaround times.
5. You can fast-track the process by being super organised on your end. If you get a list of the supporting documents required and provide everything correctly the first time to the mortgage broker, it can streamline the process significantly.
It is also important to let your mortgage broker know if you need a fast turnaround time. Under best interests’ duty, it is the mortgage broker’s obligation to give you the cheapest 3 options for you, which are not always the fastest loans.
Remember – mortgage brokers are on your side. If there is some urgency, make sure you advise them. They will know the majority of the turnaround times for the banks and can match you with the most suitable lender.
If you have any questions about the home loan process and getting pre-approval, feel free to get in contact with our friendly team today.
Zippy Financial is an award-winning mortgage brokerage specialising in home loans, property investment, commercial lending, and vehicle & asset finance. Whether you are looking to buy your first home, refinance or build your property investment portfolio, the team at Zippy Financial can help find and secure the right loan for you and your business.
About the author:
Louisa Sanghera is an award-winning mortgage broker and Director at Zippy Financial. Louisa founded Zippy Financial with the goal of helping clients grow their wealth through smart property and business financing. Louisa utilises her expert financial knowledge, vision for exceptional customer service and passion for property to help her clients achieve their lifestyle and financial goals. Louisa is an experienced speaker, financial commentator, mortgage broker industry representative and small business advocate.
Louisa Sanghera is a Credit Representative (437236) of Mortgage Specialists Pty Ltd (Australian Credit Licence No. 387025).
Disclaimer:This article contains information that is general in nature. It does not consider the objectives, financial situation or needs of any particular person. You need to consider your financial situation and needs before making any decisions based on this information. This article is not to be used in place of professional advice, whether business, health or financial.
Comparison Rate calculated on a secured loan amount of $150,000 for a term of 25 years. WARNING: This Comparison Rate is true only for the example given and may not include all fees and charges. Different terms, fees and other loan amounts might result in a different Comparison Rate. Fees and Charges Apply. Terms and Conditions are available on request.
