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.
When you want to get a home loan, there are things you can do to either improve or hinder your chances of getting approved. Here are 3 things to do to get your home loan ready in 2022.
Stay Away from Buy Now Pay Later
Whilst they are very convenient, they are also very bad for your spending history. There are so many of them popping up these days. Whether it is after pay. Zippy or any of the others, the bottom line is – banks don’t like them.
Why? Because when you borrow short-term funding for small purchases, it suggests to a lender that you:
Can’t manage your cash flow
Live beyond your means
Don’t have any savings to fall back on
Are not responsible with your money
The other thing to consider is that these “debts” are effectively considered to be a line of credit by the banks, which impacts your creditworthiness. To keep your bank statements in the best possible condition, it is advised to avoid buy now pay later schemes wherever possible.
Shop with Cash
Banks and lenders are going through your income and expenses with line-by-line attention to detail. Your disposable spending is considered when they calculate whether they believe you can afford a loan. Things like Christmas presents and socialising over the silly season will all be taken into consideration as if you spend and shop like that all year round, so try and be mindful of your spending.
Do your Tax Return
Most people know you need to provide evidence of income in the form of payslips, but a lot of people don’t realise the banks will also request to see your latest tax returns if you have added income like rental income. This is especially important for self-employed borrowers, who need to show 2 years’ worth of tax returns to prove their income.
Most lenders will want to see your current year’s tax return, or at the very minimum, the previous financial year’s return. Your tax return can be a little fiddly and time consuming to prepare, so it is a good idea to tick that off the list in advance. That way, by the time you apply for a loan, you have prepared yourself and your finances in advance and you are in the best possible position to get home loan approval.
If you have any questions about the home loan process, how much you may be able to borrow or what your options are, 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.
Everyone has been talking about mortgages for the last 12 months – ever since COVID-19 arrived, the topic of home loans has been constantly in the air.
From mortgage holidays to interest rates falling to record lows, it’s been a huge year for the finance industry.
It’s also been a huge year for you as a borrower, which is why my question for you is: when was the last time you checked your home loan interest rate?
If you haven’t taken a look at your home loan since 2019, then there’s a really good chance you’re paying too much for your mortgage.
This is because rates have fallen and banks and lenders are being more competitive than ever to try and get your business.
There are some big differences between packaged variable versus basic variable interest rates at the moment – and if you make the switch, you stand to save a lot of money.
What are the Best Home Loan Deals on the Market Today?
The answer to this question quite literally changes daily, but at the time of writing we are able to secure fixed home loans for our clients with an interest rate as low as 1.99%, and variable rates are also very low.
When I talk about packaged variableloans versus basic variable interest rate loans, you might not think there’s much of a difference.
The two loan products do sound very similar, but they’re actually really different.
A basic loan is just that – it’s a loan with no bells and whistles. You can’t save money in an offset account to reduce the amount of interest you pay. You can’t redraw money from your loan, if you make extra payments.
It’s a simple, no frills home loan and it’s quite popular with first home buyers or those borrowers who doesn’t want to pay extra features – they just want to pay their home loan off as quickly as possible.
A packaged variable loan comes at a cost, usually around $400. But for that fee, you get:
A discount on your interest rate, which can be worth up to 0.9% on a variable rate loan.
Features like offset, which can save you a lot on interest if you have a decent amount of savings.
Fee-free credit cards – some of our clients take out frequent flyer or rewards cards that have high annual fees. These fees are basically cancelled out by the package fee.
Banks are very competitive right now, with many of them even offering big cashback incentives to get your business.
We have lenders on our books who are offering between $2,000 and $4,000 as a bonus for you, if you refinance your loan with them.
Every bank has a different policy and loan criteria, which is where we can help. If you are thinking of refinancing and want to take advantage of lower interest rates or a great cash back offer, contact us today and we’ll see how we can help you get into a new loan that saves you money.
It’s one of the first questions that most borrowers ask me when we’re shopping around for a home loan:
“What’s the cheapest interest rate you can get for me?”
I totally understand the question – the interest rate you pay is going to determine how much your repayments cost you each month. It’s a very important part of the equation!
But sometimes, getting too fixated on the interest rate on offer can be like a game of “smokes and mirrors”.
Yes, you get the cheap rate – but at what cost?
In certain circumstances, going for the loan with the cut-price interest rate can cost more money in the long run.
Here are 3 ways a low-rate loan can deceive you:
When It’s a Honeymoon Rate
Many banks and lenders can fall into the habit of offering a better deal to new customers than to their existing home loan clients.
It is what’s known as a honeymoon rate and it can be quite deeply discounted compared to other loans on offer.
However, these types of deals usually only last for 12 months – 2 years at the most.
Once the honeymoon rate ends, you’re back on their standard variable rate, which could be even higher than other loans on the market.
Yes, you’ve enjoyed a good discount for the first year of the loan – but what about the next 29 years?
When it is Loaded with Expensive Fees and Charges
Sometimes, you get what you pay for.
If you pay for a basic loan, then it will come with basic inclusions. Think of it like Jetstar. Back when we could freely travel, we had the option of booking a Jetstar flight for a low price.
But once you add on $7 for seat selection, $12 for a sandwich and a coffee, $19 to update your carry-on luggage, a package to allow flexible changes and a credit card fee at the end, your fare is suddenly looking quite expensive.
Meanwhile, if you book a flexible fare with a full service carrier like Virgin Australia or Qantas, it might seem more expensive when you compare the initial price – but all of these inclusions come with the ticket price.
The same type of theory applies with home loans.
Let’s say the interest rate on Loan A is 2.7% with a $15 per month account keeping fee. The interest rate on Loan B is 2.8% with a $0 per month account keeping fee.
Depending on the size of your loan, the second option with the higher interest rate could be the less expensive option in the long run.
This is especially the case when you start to make headway with the principal of the loan, and the interest component of your repayment gets smaller and smaller.
When it Prevents you from Accessing other Benefits
Generally the lowest-priced home loans are known as “basic” loans. They come with very few bells and whistles and don’t generally give the borrower access to extra facilities like redraw or offset.
And offset account allows you to “offset” your savings against your mortgage.
If you have $100,000 in savings, for example, and you save that in an offset account against your mortgage, that means you’ll pay no mortgage interest on $100,000 worth of your loan.
Your repayment will stay the same each month (assuming it’s a principal and interest loan) and the money you DON’T spend on interest will be directed towards the principal part of your mortgage – helping you pay the loan off far more quickly.
When you analyse all of the different loans, interest rates and fees and charges on offer, and you compare them against your specific situation, it quickly becomes clear that sometimes, the loan with the cheapest rate isn’t the best deal after all.
Working with experienced mortgage broker can help you by taking into account your income, your expenses and your goals and help you obtain a loan that offers the best deal for your specific situation – so you don’t end up spending more than you need to on your loan repayments. If you’d like a free mortgage health check or you’d like us to check your borrowing power, contact our friendly team today!
New research shows that in many suburbs across Australia, it may actually cost you less money to buy your home and pay a mortgage, rather than renting.
The research, released by Aussie Home Loans in conjunction with CoreLogic, reveals that many Aussies would actually be better off making home loan repayments than paying a landlord.
In fact, more than half of the country would be financially better off if they owned their home!
The Buy vs Rent Report has analysed suburbs across Australia where mortgage repayments are cheaper than rental payments, and it found that over half (52.2 per cent) of Australian suburbs would be cheaper for homeowners than for renters.
The research is based on:
A 30-year loan term
Principal and interest repayments
35% three-year fixed rate loan
But even those who prefer a variable interest rate may be better off.
Based on a variable home loan rate of 3.65%, the report found that 1 in 3 households (or 32.9%) would find it cheaper to pay down a mortgage than pay rent on a house.
These results are hardly surprising, given the fact that mortgages are currently the cheapest they’ve ever been. Interest rates are now at lows we’ve never witnessed – I’ve certainly never seen mortgage interest rates this cheap, and I began working in the industry 30 years ago.
The really interesting part to me is that these interest rates are also quite conservative. Since the last RBA rate cut, it’s now possible for us to find you a fixed-rate home loan with an interest rate beginning with a 1.
Even for those of you who prefer the flexibility of a variable rate loan, there are many rates on the market that are far more competitive that 3.65%.
In any event, this research is good news for you, as it means your dreams and aspirations of buying your first or next home may be closer than you think.
How close are you to Buying your Home?
For those who are interested in buying a home, there are a few things you need to know.
First of all, the good news: the requirements for saving a deposit for first homebuyers is now far lower than it has been in the past.
While many banks and lenders would prefer to see a 20% deposit, in the major capital cities at least, this is something of an unrealistic target.
The median property price in Sydney has been hovering around the $1m mark in recent years, which means a 20% deposit is worth around $200,000 – a figure that is far outside the average Aussie’s ability to save.
Enter the First Home Loan Deposit Scheme (FHLDS) – a program run by the government, which allows first-time buyers to buy a home with just a 5% deposit, without having to pay lenders mortgage insurance.
As long as you can provide evidence of at least 5% in genuine savings, many banks and lenders will consider your loan application.
Now, what does genuine savings mean? It could be comprised of:
Small, regular deposits from to your savings account
Your tax refund
Compound interest and savings from a term deposit or high-interest savings account
Deposits to your account after selling unwanted goods, like tablets, iPhones or furniture you no longer need.
If saving a 5% deposit isn’t quite achievable – or if you’re not a first-home buyer, so you can’t access the FHLDS – you may be able to buy a home if you’re parents are willing to offer a family guarantee. This essentially means they’re giving the bank some security over their own property, to help you get a loan for your property.
There are a number of other grants, schemes and incentives to help buyers get into the property market, including the First Home Owners Grant (FHOG); Home Builder, which provides owner-occupiers with a grant of $25,000 to build a new home or substantially renovate an existing one; the First home super saver scheme, designed to help you save more money for your deposit; and there are also a number of first-home buyer discounts and concessions off your stamp duty.
These grants and schemes offer the chance to save tens of thousands of dollars off the purchase price of your home – and with interest rates this low, make the prospect of home ownership the most affordable it’s been in years.
This article contains information that is general in nature. It does not take into account the objectives, financial situation or needs of any particular person. You need to consider your financial situation or needs before making any decisions based on this information.
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.
