- Hey it's Connie again from Prosperity Finance,
I hope you're doing well.
Now in the last video, I shared with you
about five tips, how to maximize your home loan application
outcome during the COVID-19 lockdown.
Today, I'm going to share with you, the other five.
So just a quick recap, what we discussed last time.
Now the first five tips is, you need to have a stable income
or your income has recovered from COVID-19 impact.
And number two, if you have existing rental,
please make sure you can show your rental income
on your bank statements, and make sure
that you have your tenants in your rental property.
Number three, if you have boarders,
please also show the boarder income on your bank transfers
rather than taking cash.
Number four, watch out your living expenses,
make sure you spend reasonably,
because if you spend too much,
the bank will punish you
by lowering your borrowing capacity.
And number five, if you have an existing home loan,
watch out your existing home loan detail,
it may make sense to break your loan
and refix at lower rates
to help you borrow more for the future.
Today, I'm going to share with you the other five.
So number six is if you have high credit card limits,
it will lower your borrowing capacity.
Now, credit card limits can be increased over time,
especially, if you have a good credit history,
bank love those customers, they proactively come to you,
write you a letter and say, would you like to increase it
by another 3,000?
And if you're proud about that, because you have a good
credit history, then you probably say, yep, why not?
It will cover your holidays and your spending as well,
so why not?
Well, it does matter if you want to borrow money,
especially, if you really want to max out your borrowing
capacity, and you're not really using your credit card
to the maximum, then best to keep your credit card limits
at a reasonable level.
The lower the credit card limits, the better, to be honest.
And if you do have to travel in the future
and you want that particular months to have high limits,
you can temporary increase your credit card limits,
it's not a big deal.
So credit card limits do have impact
on your borrowing capacity.
Now, number seven is if you're a first home buyers,
if you can have a 20% deposit,
please say you have 20% deposit,
that's because after COVID-19 lockdown,
banks are really concerned about lending at high LVR.
So LVR is loan to value ratio,
if you borrow 800K to buy a million dollar house,
the LVR, Loan to Value Ratio is 80%,
if you borrow more than 80%, the bank is concerned,
because the property market, the value can go down,
and your income can be unstable in the current environment,
so they don't really want to lend you,
they have limited appetite in that space.
And a lot of banks only give that opportunity
to their own customers, i.e, your salary or wages
get paid to that bank, that's how they qualify
their own customers.
And they will lend you less now than before COVID-19,
because they've tightened up their policy.
So if you can have 20%, not everyone can,
but if you can have a 20% deposit, please do provide 20%.
It can be gifted, can be saving, from Kiwisaver,
First Home Grant, et cetera.
So bank accept these forms of deposit.
Number eight is if you have existing property,
and you're looking to buy another property,
as your new home or rental property,
make sure your property equity is in the right bank.
Now, your equity probably is the same,
no matter which banks holds your property,
your current property, however, not all the banks are equal
in terms of lending capacity.
Now if your equity stay in the bank,
where the bank can't lend you too much,
but the other bank can, but they don't have equity in place,
so they will ask you for 20% deposit
or you have to move equity.
But, you're probably in the middle of a fixed term
interest rate and to take your equity from one bank
to the other, probably would cost you a lot of money.
So make sure that you plan in advance,
and understand which bank is the best bank
to hold your equity and put your equity there
at the time that allows, to minimize the cost.
So that's number eight.
Number nine is make sure you don't have big
personal loans.
Personal includes consumer loans that you buy appliances,
big items, cars, personal loan in the bank's eyes
indicates that you spend more than you earn.
And if that's the case,
high risk of not repaying the home loan
because you spent too much.
And I understand that sometimes it's just some promotions
from personal loan lenders
for zero interest rates et cetera,
a lot of people take personal loans just because
it's lower interest rates or zero interest rates,
so it might make perfect sense,
but there's no guarantee that you would repay entirely,
by the time the free interest term expire.
So best not to have a personal loan or minimize
your personal loan if you want to borrow for home loan
with the banks.
And lastly, it's about watch out your account conduct,
what I mean by that is try not to have unarranged overdraft.
You might have a direct debit just went through
and caused unauthorized overdraft.
It's okay, and it happens from time to time
and it even happened to me, however,
in the bank's eyes that means you probably
don't have enough money to cover your spending.
Similar to personal loan, so yeah, make sure
before you apply for home loan, your account conduct
is crystal clear and there's nothing,
there's no any weakness
in your transaction behavior et cetera.
And also, what I mean by conduct is,
best not to have casino transactions.
Now, occasionally you can have entertainment at casino,
that's fine, but not before submitting your application,
because the bank may perceive that you do gamble sometimes,
and as you know, you can lose a lot of money
as a result.
So there'll be associated risk,
so if you are about to apply for your home loan,
make sure you don't visit casino.
So today, I just shared with you the other five tips
on how to maximize your home loan approval outcome.
So plus the other five, I hope you find them useful.
If your family and friends are also in a stage,
they're wanting to apply for a home loan,
please do share this video with them
so that they can benefit from that as well.
Thank you so much for watching, take care,
and I'll see you next time, bye bye.