There has been much in the media recently around changes to the Credit Contracts and Consumer Finance Act 2003 (CCCFA). Much has been said on how the changes due to come into play will make it increasingly difficult for first home buyers and borrowers aged over 50, in particular, to get mortgages.
However, many of these articles and blogs seem to be almost missing the point.
The CCCFA changes will not impact on banks’ lending criteria. Your ability to get a loan will not change. What the changes will impact is the need for lenders to evidence a borrower’s ability to repay a loan. Banks will need to be able to provide a clear evidentiary trail of customer affordability, and that’s where we can help.
What does that mean in practice?
Mortgage approvals will require a new level of disclosure, but banks’ lending criteria will remain the same.
When doing their due diligence, banks will place a more granular emphasis on affordability, actually looking at your spending habits as well as traditional expenses such as rates, water bills, power bills and transport costs.
You will be required to evidence spending through bank statements, credit card bills and if necessary, the bills themselves. Knowing how to verify expense information against reliable evidence could be a very time-consuming and frustrating process if you’re unsure how to. Older borrowers wanting a mortgage may need to outline a clear exit strategy showing how the loan will be paid down.
If you don’t have all your ‘Ts’ crossed and ‘Is’ dotted, the new act could slow the whole application process down, but the key takeaway here is that is loan criteria itself is not any harder.
The Global Finance answer
Because we are constantly in touch with banks directly, as opposed to getting information through the media, we know what you’ll be asked for and we know what the lending criteria is a for each and every lender in New Zealand.
Our access to loan affordability calculator or LAC of major banks means, you won’t waste precious time applying for loans for banks whose criteria you don’t meet.
Our mortgage brokers will make the loan application process easier and faster. Instead of you going through the pain of being turned down for a mortgage because you haven’t got the paperwork in place, we’ll make home loan application process work.
How our mortgage brokers can help
Banks will ask customers to evidence their income in minute detail, possibly even including a letter from your employer, or if you own your own business, you’ll need evidentiary trail of income derived from that business in the form of income, drawings or dividends. We can help you get organised, and we can make sure you only have to do it once.
When it comes to spending, we will work with you to verify the amount of the expense with reliable evidence, such as recent transaction records like a bank account for a period of at least 90 days, or a copy of a contract, bill or invoice.
CCCFA changes mean there here will be more compliance and paperwork added to the loan application process, but we know how to get you through it.
Affordability and suitability solutions
Banks will ask for information on regular expenses on their bank statements such as utilities, insurances, food and groceries, and transport expenses, including fuel, warrant of fitness, vehicle registration, and maintenance as well as coffees, gym memberships, childcare expenses, how often you go out to dinner, subscriptions such as Netflix and Spotify, and buy-now-pay-later deals such as Afterpay, Laybuy and Zip or any fixed commitments you think we should add. We will work with you to create a budget and get all the paperwork in place evidencing your spending behaviour.
Your payback plan
If you’re over 50 and wanting a mortgage, banks will be concerned about how the loan is to be paid off. At this stage of your life, you’re probably in your prime financially, yet banks may assume you will no longer be working before the loan is paid off.
By law, age alone cannot be a barrier to a loan – banks and other lenders cannot discriminate against age – but lenders do need to assess and document your assets and your liabilities and your exit strategy, as they have always had to.
We’ll work with you to ensure you’re well prepared when it comes to applying for a mortgage and can demonstrate an exit strategy that outlines how you will pay off the loan or prove you can service the loan during retirement.
Not all New Zealanders are retired at 65 or 70; many still have good jobs paying healthy incomes and can afford that mortgage. We will outline your exit plan for the bank. That plan may include income from boarders, a shorter-term loan, the planned sale pf other investment properties by a set date, your superannuation, revenue from a diversified share portfolio and other assets, or access to KiwiSaver.
Getting a mortgage is not getting tougher
Lending criteria for more mature borrowers or first-home buyers will not be any different when changes to the Credit Contracts and Consumer Finance Act 2003 (CCCFA) come into play in December. The only change is the onus on the lenders to record your financial situation and plans more stringently. They have to have a clearer evidentiary trail of your loan servicing ability.
Clarifying the mortgage process
Our mortgage brokers can take the stress out of the process. We can talk through your goals and how best to achieve them by exploring your options and finding the right approach for you and then evidencing it for most suitable lenders. Sit down with one of our finance professionals. Global Finance can help. Contact us today to book in a no-obligation chat.
**These are general guidelines and are by no means a reflection of bank or lending policies