Property Management Newsletter
What to Expect When Applying for a Loan
RLA 150557
August 2019
Banks have tightened their lending criteria and how they assess loan applications lately. They are focused on whether borrowers can service their loans and are going through a borrower’s transaction history line by line, questioning expenses that don’t stack up with the information provided. Applicants need to be prepared to justify their expenses and provide proof of their situation across a range of areas.
Service Your Heater | A Warning for Property Owners
The ongoing financial impact of maternity leave, children and pets is a particular focus at the moment.
Faulty, poorly maintained or misused gas heaters can leak potentially lethal carbon monoxide gas – an issue that has been highlighted in the news recently.
For example a purchase at a pet store could prompt a bank to clarify how many pets the applicant actually has. Considering one dog or cat costs about $25,000 over its lifetime, it’s a concern that may be justified. Banks have also questioned joint applicants over whether children would jeopardise their ability to repay loans and some lenders have requested proof that borrowers are returning to work after parental leave, even if the loan can be serviced on one income.
The five most important standard questions banks ask borrowers While home loan applicants can expect detailed and often strange queries about their spending habits, these five questions matter the most (according to Lendi) 1. What are your living expenses? Applicants are required to provide a highly detailed view of their monthly living expenses. Leaving out details will raise doubts and questions.
2. Do you have a good credit history? Borrowers who have been slack with credit repayments or slow to pay bills will have reduced borrowing power. 3. What is your employment history? Banks want to see a consistent and sustainable work and income history. For full-time permanent employees, most lenders like to see at least 6 months’ continuous employment in their current job. Applicants who are not permanent full-time employees will face more scrutiny. 4. Are you a good saver? Saving history is particularly important, especially for first-home buyers. Banks often want to see how a borrower acquired their deposit. The size of the deposit will also determine the loan-to-value ratio and affect the loan package offered. Lenders also like to see some extra savings that can be drawn on for unexpected expenses. 5. How do your loan terms fit with your broader plans? Increasingly, lenders are closely examining proposed loan terms so it’s important to explain the rationale behind the proposed length of the loan or interest-only period. Information sourced domain.com.au
The tenant in your property won’t be able to tell if the heater is leaking carbon monoxide, because they can’t see or smell it, it’s colourless and odourless. Gas appliances should be checked and serviced by a licensed gas fitter or service agent, as per the manufacturer’s instructions, or at a minimum every two years. If the appliance is over 10 years old, it should be checked annually. Please instruct your property manager to arrange a service if your heater has not been serviced in the last 2 years. Even if your property doesn’t have a gas heater, as the owner you still have a responsibility to maintain any other heaters in the property – all flues and chimneys should be cleaned annually, and reverse cycle air-conditioners should also be serviced yearly.