It seems every day we are getting closer and closer to re-opening restaurants, cafe’s and other businesses that closed due to Covid-19 and the Government responses.
The chatter around the lenders is that they are looking forward to getting back to lending money as quickly as possible, and with this in mind, it is important to have all your ducks lined up and make sure you are ready to go.
As well as this, government pressure to ease lending criteria and a super-competitive interest rate landscape (our lowest is at 2.09% fixed… wowee!) makes for plenty of reasons to look at either refinancing, or even purchasing an investment property or new home.
To assist with this, we would like to give some tips on what you can do to be ready to lend.
1. Your Spending habits
Not only do your spending habits include what you spend your money on and where, it also includes paying bills on time, and ensuring you save regularly. Lenders LOVE it when there is regularity within spending habits (loans paid on time, regular savings, etc). It takes the guess work out of how people behave financially. The more predictable you are, the easier you are to lend to.
Another thing to watch out for is WHERE you spend your money. Lenders are digging deeper into statements than ever before, with artificial intelligence playing a large roll in this. Some questions that are being asked are things such as if a person takes money out of an ATM on a regular basis, and if the ATM is located either near a “Pokies Venue” or “Bottle Shop”, does the person have any issue with gambling or drinking? Sounds horridly intrusive doesn’t it! But this is reality, and you need to be aware of it.
2. Your credit file
Once upon a time, your credit file would only show things that you failed to pay over a long period of time, as well as some companies that you applied to for credit. Now though, it shows a lot more. Such as who you have enquired with, what credit you have, and how you have been performing with it. All of this will add up to a “credit score” which gives the lenders an indication of your credit worthiness.
Some lenders take this score as “gospel”, and some as a guide, however it is obvious the higher the score, the more likely the lender will be willing to lend to you. This includes things like Afterpay and other credit services. In the future it is likely to also include utilities and bills such as Gym memberships, etc. So make sure you pay your bills on time, don’t over borrow, and be VERY careful on how many people you enquire about credit with (this includes mobile phone companies, internet providers and more, as they all do an initial credit check. It all adds up!
3. Your income
Over the last few months, lenders have tightened the way they look at income. Let’s break it down into 2 categories:
PAYG Income: A lot of lenders have changed the way they look at PAYG income over the last few months. A good example is overtime. Simply put, they have reduced the ratio of overtime they take into consideration from 100% (in some cases), down to 50%. However, having more information on this can make it easier to use the full overtime if you are required to. One way to do this is to ensure your tax returns are up to date and lodged. It is critical to ensure you have all your income information up to date.
Self Employed: Here is where it gets tricky. A lot of businesses have been claiming the job-keeper allowance and other incentives just to keep afloat. We are learning from the lenders that given the current status of the situation, they are likely to take this income into consideration should you wish to lend. There are also a lot of incentives for tax breaks and it would be HIGHLY advisable to talk to your HTA accountant about preparing the income should you wish to borrow now, or in the near future. Again, having up to date information is critical to getting the credit you need.
So, with all the lenders opening up their lending policies and some amazing interest rates to take advantage of, it would be well worth getting in touch with Ben and organising a chat today.