By Michelle Murchison
“There is a law of gratitude, and if you are to get the results you seek, it is absolutely necessary that you should observe this law… it is the natural principle that action and reaction are always equal and in opposite directions.”—Wallace D Wattles, The Science of Getting Rich
While credit rationalisation continues across the finance industry, by being informed, planning and taking appropriate action, you have a greater opportunity to obtain the desired 'reaction' from a lender for finance.
Some areas that may impact on people wishing to invest further are…
when accessing equity from property (to buy investment property or invest in shares/managed funds) in the past, minimal disclosure of the purpose of funds was required. This has now changed. Often evidence or explanation by way of a pending purchase contract and/or letter from an accountant or financial planner will be required. While it's often recommended to build in 'buffers' for unforseen expenses, this requires the right context for the lender to accept as reasonable and realistic.
depending on the type of property and where, bank valuations are tending towards conservatism despite the apparent demand for the property. Unfortunately, this can sometimes be the difference in the transaction proceeding or not, as the bank will lend up to maximum LVR (loan to value) based on contract price or valuation, whichever is the lesser.
predominantly designed for self-employed borrowers and not requiring the same level of financial documents, borrowers would declare their income and the Lender would rely on this. Low doc policy is now becoming more stringent and/or commanding higher interest rates, to reflect the perceived higher risk by the lender. Several lenders are now requiring BAS statements within this policy. These products have been impacted the most by the credit rationalisation and may take some time to readjust over time.
There is still an abundance of money to be lent to those who understand how best to present their application (with the right advisors). With appropriate forward planning, consider borrowing for future investment plans, when you don't need to. By doing this, you place yourself under less pressure to seem 'desperate' to the lender for the money. If you are clear about what you want to achieve—and it's reasonable—it's amazing how this conveys in a finance application.
Mortgage finance is an ever changing market place and there is every sign it will continue. Therefore, it is important to have a strategic, forward-planning approach to your finance needs by engaging the services of an experienced mortgage professional that can provide solutions and alternatives.
So take the time to consider your ideas and strategies for the next one to five years, seek the advice of a mortgage advisor who knows and understands what benchmarks are relevant for you to plan in advance. Keep your finances in order (stick to your budget!), so you can act upon opportunities and be ready to use borrowings to leverage—the smart way to build wealth.
Michelle Murchison is the owner of Money Advantage.
moneyadvantage.com.au
