In the Loan Market Paramount office, at least 90 per cent of current transactions are mortgage applications for ‘essential workers’ and there’s a good reason for this – they know their jobs are secure.
The thing is, although the Reserve Bank eased LVR restrictions as a stimulus move in the wake of COVID-19, it’s only a guideline for the banks – and not all banks have eased their own policies to match. In fact, to date, only a couple of them have. This may change, but right now, banks are wary of new lending and they’re tightening up requirements.
Banks still want to see your financials for the past two years, but with the uncertainty of the current environment, these numbers are less relevant – what the banks really want to know is what your income will be in the next few months. That means it’s getting harder to obtain finance if you cannot confidently anticipate a sustainable future income – whether you’re self-employed, a business owner or an employee. For clients still on reduced hours, we’re also seeing some banks asking them to provide a letter stating when they’ll be back to full-time work.
But if you’re in secure employment (like essential workers, and anyone else who hasn’t had their employment/income impacted by COVID-19) then the banks are open for business. If you’re buying a second property and you’ve got good equity to work with, that’s even better. Banks are closely analysing applications, though, so get yourself prepped and into the best possible position to improve your chances: that means getting rid of all short-term debt, making sure your account conduct is top-notch and building up a good savings history.
If you do tick all the boxes, you may find that it’s easier than ever to buy a property. Although it technically requires a deposit of 10 per cent to buy an existing property right now, a lot of banks are reducing this to 5 per cent for those in stable employment. It’s a good time to buy, with good-value property here in Christchurch and record-low interest rates, but all of this uncertainty, combined with increased scrutiny from lenders, makes it more important than ever to talk to a mortgage broker about your plans. Working with a mortgage broker means they’ll shop around and put your application in front of those banks that are lending up to 80 per cent on investment properties, for instance.
And, if you are taking on new lending, then play it safe and don’t load yourself up with too much debt. The events of the past few months are a reminder that you never know what’s around the corner!
Years of experience mean Nathan Miglani knows how to give you the best possible chance of success with your mortgage application. Passionate about helping you through the process of buying a home or business, he’ll find the best deal for your unique circumstances. loanmarket.co.nz/nathan-miglani