When searching for a new home, it’s important to keep an eye on the world of financing and specifically the fates of mortgage interest rates.
Whether you’re seeking a mortgage for a first or new home, or you’ve been issued a pre-approved loan by your lender, any changes to interest rates are likely to affect your buying power.
For the past few years, buyers have had access to cheap money. It wasn’t always like that, but we’ve enjoyed a prolonged period of record-low rates and The Reserve Bank of Australia has stated the situation won’t change until at least 2024.
But the loans landscape will be different from November 1, 2021. The Australian Prudential Regulation Authority (APRA) has ruled lenders must ensure customers can maintain mortgage payments if rates rise 3%. This could reduce the money you can borrow by up to 5%.
The contingency is designed to prevent mortgage holders defaulting en masse if the cost of credit rises. More than one in five loans issued in the June quarter were six times the borrowers’ incomes.
If you’re currently in the process of applying for a loan, you should expect additional scrutiny of your application, and there may be some delays to approvals while the system adjusts to the new obligations.
To try and keep things on track, make sure you apply early and have all your paperwork in good order. Here’s a list of the essential documents and details you’ll need as part of an application for a loan.
- Identity – You’ll need a driver’s licence and passport. Either maybe be substituted with a Medicare card or birth certificate. Non-citizens must show their visas. A lender will ask for your mother’s maiden name, details of your nearest relative and where you’ve lived during the past three years.
- Earnings – Two payslips, a bank statement and the last two tax returns usually get the job done. You should also declare if you have any companies and ASIC registration.
- Wealth – You’ll need to prove your savings with a bank statement that covers the previous three months. State any shares you own and provide a rates notice of any property you own.
- Debts – Declare any loan, such as those for a car, furniture or holiday. Show the last three months of your credit card spending.
- Outgoings – Estimate your day-to-day expenditure and use your credit/debit card statements to indicate spending habits. Show receipts for any rent you pay.
- Dependents – State whether you’re responsible for anyone else (e.g. children, spouse).
- History – Don’t hide any issues. Your credit rating and history are easy to find. You’ll also need to state your work history for the past three years.
This article is provided for general information only and does not take into account the specific needs, objectives or circumstances of the reader. Before acting on any information, you should consider whether it is appropriate for your personal circumstances, carry out your own research and seek professional advice.