What's happening with banks?
Banks are tightening their belts.
We're witnessing increased interest rates, stricter serviceability rates, and in some cases, banks are less accepting of certain income components than they used to be.
For instance, if a significant part of your earnings comes from bonuses, dividends, or profit shares, you might find it challenging to get the nod from your bank.
So today I thought it would be worth exploring how to optimize your income to enhance your mortgage application, especially in the current financial landscape.
Presenting a strong application
There are several ways to ensure your application shines in the best light, and these are strategies we're using every day with our clients to ensure they get the best result possible.
We call this "pulling levers" and it's one of the cornerstones of what makes My Mortgage awesome - we leave no stone unturned.
Government assistance
Many families qualify for 'working for families' benefits. Banks often consider this, especially based on the age of your children.
With recent changes in government policies, you might be eligible for assistance you weren't aware of.
Additional income
If you're open to it, renting out a room can be a consistent income booster. Whether you're single, a couple, or living in a flatting situation, this can be a viable option.
Other borrowers might look to take on more hours, a role in an area they're passionate about, or do some overtime when it's offered by their existing employer.
Exploring different banks
Some banks might accept a higher percentage of your bonus or salary income. By exploring different lenders, you might find one with a policy more favorable to your income structure.
In other cases, certain banks servicing criteria can fit your situation better - i.e. if you have multiple properties, some banks allocate expenses differently. If you have less deposit, other banks are friendlier.
Self-employed
If you're self-employed and haven't completed your financials for this year, don't despair.
We can collaborate with your accountant to create forecasts or, if your business is new, draft a forward-looking business plan.
Again, different banks look at this situation from varying perspectives and we can craft a narrative about your employment history which will help put your best foot forward.
If you have a good deposit and are buying in an urban area, we may also be able to source options outside the standard banks.
Joint borrowing
Consider buying property with friends or family.
The trend of multi-generational purchases is on the rise, and pooling resources can make a significant difference.
When it comes to deposit and income, this can be the difference between buying or not at all, so it's worth exploring.
A real caveat here that it's important to set up a relationship property agreement to ensure everyone's contribution is recorded and it's clear what you have agreed on. Talk to us or your lawyer if you're not sure how to do this
Think outside the box
As lending policy continues to evolve and change, traditional approaches may not always yield the best results, and it's even more important to look at alternative strategies!
Even if a bank has turned you down, we can help. A "no" isn't the end of the road.
So if you're navigating the maze of mortgage applications and aren't sure how to put your best foot forward, reach out to us at My Mortgage.
Together we can make a plan, and ensure your mortgage journey is smooth and successful.