By Michelle Murchison
If you've tried to apply for a loan recently, you may have discovered the Banks are making it more difficult for you to understand what they want, and/or they're taking longer to decide what they want from you, as the potential borrower.
During these changing times, now is an opportune time for us to identify and adapt to the changes, so that we can be prepared and move towards opportunities. After all, greatness comes where preparedness and opportunity meet!
While our media has been honing in on the negatives, I am repeatedly glad to hear others share what great opportunities they are seeing in these changing times, whether to buy great value real estate, start a new business, or simply to reduce the home mortgage at a faster rate due to lower interest rates. We all have a choice on how we respond today, and prepare for tomorrow.
Yes, the banks are making things more difficult for people to lend money. Imagine, if you were in the banks' shoes, with rates around 5%, why wouldn't you make it a bit more difficult to lend the money? So, all you need to do is plan ahead and think carefully about the following...
Have you ever heard about the 5Cs of lending? Most lenders use these five factors when considering a loan:
1. Character – your demonstrated financial performance and money management reflects in your credit score/report activity.
2. Capital – demonstrating your financial position; your current assets, liabilities, net worth (the difference between your asset and liability values) and equity available to access for new loan. Equity, for a first home buyer, may be how much deposit is available toward the purchase.
3. Capacity – Your ability to repay the loan, your debt ratio.
4. Collateral – This is what you offer the lender for security should you default or cannot repay the loan – this is the real estate asset.
5. Conditions – These are things a lender may want additionally of you to assure or encourage repayment of the loan.
It is highly recommended that you work on improving your weak Cs so that you can improve your chances of getting what you want. Knowing what a lender expects before applying can only help your chances of getting the loan.
Watch out for more tips on how to get the banks to lend you money in the next issue. Or contact your Mortgage Broker who can assist with your finance strategy.
Michelle is the owner of Money Advantage, a company that arranges mortgage finance for clients who want to participate in their wealth building through property investment. www.moneyadvantage.com.au
