With COVID restrictions beginning to ease across the country, those who were looking to enter the market pre-COVID may be looking at coming out of hibernation. Additionally, those with existing mortgages are looking at their loan structures and wondering if now is a good time to refinance. So the question we are posed with is:
“Is it the right time to take out a home loan or to refinance?”
The general consensus, yes. Just be prepared for the process to take a little longer than usual. Here’s our general 2020 lending wrap-up for those looking to invest post-COVID.
2020 Lending Overview
One of the silver linings for the property market is the historically low interest rates. Those looking to buy, invest or refinance have an opportunity to benefit from the lowest interest rates in Australian history. Aussies have caught onto it with some lenders recording their highest number of loan approvals in July this year.
Owner-occupied principle and interest (P&I) rates start from as low as 2.68%. Fixed rates from 2.19% and 2.29% (subject to timing of settlement) and variable investment rates from 2.99% P&I. All rates are subject to change as always and subject to the standard credit checks and assessments.
Prepare for additional paperwork
The single common theme amongst all lenders is the need for additional paperwork. Banks are being more stringent than ever before. So prepare to dig into your financial and employment past. You will need to provide more evidence with your applications and expect more back and forth between your lender. But if you have the patience, the hard work will pay off. After all, the bank is simply ensuring you have the financial means to repay your loan without getting yourself into financial trouble.
Will JobKeeper affect my chances of a loan?
We are even seeing loan approvals from those still on JobKeeper payments. For the self-employed this is a little trickier. You will likely need to provide more evidence such as your yearly tax returns, BAS statements, trading accounts and Profit and Loss statements. But for those employed and receiving JobKeeper from their employers, this is seemingly not affecting loan approvals.
I deferred my current home loan through COVID. Will this affect my new loan application?
Many Aussies opted to defer their home loan during COVID. Banks deferred the repayments of 1 in 14 loans, equalling 429,00 loans to be precise. If you are looking to invest, make sure to take the repayment pause off your loan first. Have a steady repayment schedule in place again before you apply. This will show the bank you are successfully repaying your existing mortgage and can handle the addition of another.
I am self-employed. Will my application be approved?
As we mentioned earlier, if you are self-employed, expect to supply more paperwork than you may expect. BAS statements, tax returns, P&L and trading bank account statements. You will need to prove if your income has dropped, stayed the same, or even better – increased.
Prepare for policy changes
With the COVID situation changing on a daily basis, prepare for some banks to change their policies within a blink of an eye.
Give yourself time
When it comes to the contract stage, it is important to give yourself enough time to get your finance approved. Ensure the finance clause allows for the additional time banks require to assess your application. Get finance preapproval where possible.
If you are looking to take out your first home loan, refinance or looking to invest, give our mortgage broking team a call today.