It is official, banks are making it tougher to get a home mortgage.
Despite the bail out from the Federal Government to free up lending, it seems some of our major banks have not got the message. A client reported to me today that she had been knocked back for a home loan by her bank (One of the Big Four), despite only looking to borrow a maximum LVR of 77%.
LVR is the abbreviation for the lending term Loan to Valuation Ratio. Like other ratios LVR is expressed as a percentage and is calculated by dividing the amount you need to borrow by the lenders valuation of the property used as security.
Eg if want to borrow $400,000 and your property is valued at $500,000. LVR would be (400,000/$500,000)x100 = 80% Generally an LVR of less than 80% is attractive to most mortgage lenders. The higher the LVR the riskier the proposition for the mortgage lender.
Now there are many reasons why a mortgage lender declines an application, but after reviewing the details I am at a loss to understand their decision and have referred my client to my mortgage broker. I will report further on this matter.
So is this an indication of how the major lenders are going to react to the current crisis? I hope not. The bail out and deposit guarantee was provided so they would lend money and help the economy grow. Could it be they are now a bit gun shy? A smaller bank I could understand, but the big four must do their bit. They have been taking for a long time, it is now time to give a little back.
Please don’t be discouraged if you ever get a knock back from a home loan mortgage lender. Get yourself a competent mortgage broker. They will go the extra mile for you, leave no stone unturned, in their efforts to help you get the home finance you need.