Understanding the basics of the Mortgage Broking business will help to build a relationship of trust when talking to clients. Here are a few points to know:
1. Pre-approvals – stop accepting pre-approvals as finance being approved, ask for a Conditional Approval with the only condition being subject to a satisfactory property being located. The reason; the banks are not assessing loans unless they have a contract of sale or unless the broker requests a full assessment (For all Avenue Financial applications this is requested as standard).
2. Living Expenses – there are now up to 15 different categories of living expenses that need to be verified. If the credit assessor is not happy with the amount quoted they will ask for transaction and credit card statements covering three months and use this to verify. This is why the loan applications need to be conditionally approved.
3. Existing Loans – existing loans are no longer being viewed using the existing repayment. This is being buffered at a higher rate to protect the client from any increase and any reduction in the loan term for interest only (for example, a 30-year loan term with five years interest only has a repayment term of 25 years).
4. Serviceability – interest rates are being assessed between 7.5% - 8.5% so a rate increase will not impact this area of serviceability, it will however impact if the living expenses and existing loan repayments have not been accounted for correctly.
5. Interest Rates – interest rates are on the increase with a number of banks already moving.
6. Interest Only v Principal & Interest – loans with repayments on Interest Only have a higher interest rate than those on Principal and Interest repayments whether the purpose of the loan is personal or investment. (Note: there are only a few circumstances where Interest Only will be applied for personal purposes e.g. construction, building renovations or impending sale)
To find out more speak with one of the Avenue Financial team, visit the website or contact us via firstname.lastname@example.org