[AMA] I Have Worked as Home Loans and Small Business Loans Specialist. The Views Are My Own Not My Employer

I have worked as a Lender(Home Loans and Small Business Loans). Happy to discuss loans related queries.

I am not giving any financial or legal advice here. So consider your situation before making any financial or legal decisions.

The views are my own and do not represent ANZ or any other bank.

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  • +2 votes

    What do you check in credit report and how many years you go back?

    • +2 votes

      Most of the loan writers do not get to see your credit report. The system does the checking and no one knows what it checks in full. Based on experience we can make a guess on some obvious things but do not know all the things the system checks for.

      •  

        My last lender asked me a question about my credit card that I closed two years ago. The only way they could learn about it is from the credit report.

        • +2 votes

          You are right. Once the application is submitted, these things are highlighted by the system. And then have to be clarified by customer and the person writing the deal. I believe everyone should keep an eye in their credit history. It's free to see now a days anyway. Also, it's only getting more critical piece of information day by day with comprehensive credit reporting coming into picture.

      •  

        That's kind of scary. Big black box.

        •  

          I guessthey keep them secret so that people cannot find out ways around them.

        •  

          Not really - you can order your own.

          For assessors, seeing a credit report is not really necessary - it either meets the banks requirements (no defaults) or it does not (defaults).
          Anything that needs to be queried is sent to assessor anyway.

        •  

          I work in credit risk at a big4 bank and it's really not that interesting. Mostly scored based on past credit behaviour like arrears/defaults with a few hard decline rules. If you can comfortably pass servicing then it's mostly no drama

      •  

        Will I have a credit report if I never get a credit card or have a previous loan? Will that be detrimental to applying for a home loan at some point?

        • +1 vote

          Not detrimental but with comprehensive credit reporting coming into picture. It pushes your score up if you have debt and pay on time.

          And yes you do have a credit report. You can make an account on credit savy and other such providers and see info for free.

  •  

    Do Banks look unfavourably on Guarantor loans? Only certain banks allow it, I'm lead to believe. My 'rents have offered to guarantee for myself - they have about 900k-1M equity, I believe, spread over two properties.

    Also, does that change lending criteria needed as well as deposit required, with regards to LMI? Thx

    • +2 votes

      Guarantor loan is a risky proposition in itself. Every bank has a risk apetite and based on that they decide policy or tweek it from time to time. Also, depends on the suitability of guarantor too. Imagine a news that says "aged parents kicked out of their home by major bank because the son didn't pay the loan." Banks don't like these news and do not want to do such things either. So we have to access the situation of person providing guarantee.

      Not sure what you mean when you say guarantor and LMI in 1 case. Why would you need both.

      • +1 vote

        Guarantor loan is a risky proposition in itself.

        Is this in your opinion, or widely accepted in your experience? (I'm not being a d1ck, I'm just asking for clarity)

        Not sure what you mean when you say guarantor and LMI in 1 case. Why would you need both.

        So it completely removes LMI need, or reduces it? I'm in the process of saving a deposit anyway, but just thinking of keeping my parents generous offer in the back of my mind.

        • +1 vote

          Not an expert, but afaik LMI depends almost solely on how much you're borrowing as a percentage of the property value (LVR). Whether you have a guarantor isn't a factor I don't think (unless they're ponying up their own property, in which case the LVR is lower - that'd make LMI unnecessary, not the fact of there being a guarantor).

          • +5 votes

            @HighAndDry: I thought LMI was an insurance for the bank, like compressive insurance for your car, but LMI is to protect the bank, not you.

            Having a guarantor is the insurance for the bank. You're using the equity from that property to fund the 20% required to avoid LMI. If you default, your parents may lose the house.

            •  

              @Ughhh: Yeah basically. But it works by way of reducing the LVR you're borrowing, not just because you have a guarantor, if that makes sense. Either that or I'm butchering this spectacularly.

            •  

              @Ughhh: That is right.

        •  

          Is this in your opinion, or widely accepted in your experience? (I'm not being a d1ck, I'm just asking for clarity)- Not my personal opiniin but how credit works. There is risk associated with lending money to people. But based on past experiences, lenders learn their lessons. So loans like constructions loans, security guarantee loan, bridging loan and owner builder have proven to be risky. But doesn't mean bank is not willing to take a risk. How is the risk mitigated is importamt too.

        • +2 votes

          You do not need to pay LMI. If they go guarantor and bank accepts them as guarantor.

    • +2 votes

      This is becoming a tricky space (at least in the short term). With the roll out of BCOP and new levels of rigour around "corporate benefit" and obtaining these guarantees I suspect they will become more uncommon. Sadly this may make startup business a bit trickier for those using parents equity. The reality is no lender wants to sell up your parents. It would help though were it an investment property.

      •  

        You are so right. Sounds like you are in the industry 😊.

    •  

      You may as well get your parents to borrow against their house and just give you the money.

      •  

        I think that's bordering grotesquely generous on their part, lmao, and definitely not what they're offering.

  • +3 votes

    Do you believe brokers really get the best deal for their clients, or get the best return for themselves?

    • +3 votes

      We cannot generalize all the brokers into one statement. Yes, the first thing on their mind is their own personal interest but that helps client's case too.
      Eg. Fixed rates for 2 years. They will find you the best possible deal but helps them to lock you for 2 years because they have to pay back the commission to bank if you refinance within 2 years.
      Bankers can be more switched on than broker or vice versa.

      • +5 votes

        I dealt with a mortgage broker who suggested straight away that I should fix, or partially fix my rate. I was almost set to going with that when I asked what the variable rate was. I assumed it would've been much higher since it wasn't mentioned at all up to that point. But the variable rate was only marginally higher and was due to come down (lower than the fixed rate) in the next month with the latest drop in interest rates. This explains why I was being pushed to fix.

  • +1 vote

    Not sure what you mean when you say guarantor and LMI in 1 case. Why would you need both.

    Interested to know more about this, does that mean you don't need an LMI or as big as one if you have a guarantor?

    Also I heard rumours that LMI is changing to 5% would you happen to know if thats true?

    As a newb myself whats probably the 1 or 2 top advice you'd give in getting a home loan (or making the process go easier).

    •  

      The top advise is to deal with an experienced lender. Who cares for you…No matter broker or banker. They both have their own positives and negatives.
      Once you have found one just stick to the person.
      And regarding LMI, no you don't have to pay LMI when you have a guarantor giving security guarantee for you. Discuss with the lender in detail regarding the deposit amount that will have to be paid to vendor when you sign contract. And govt fees like stamp duty etc.

      •  

        Thanks mate, much appreciated!

  •  

    Any suggestions for self employed to get a better deal on mortgage interest rates?

    • +1 vote

      Not sure why you are mentioning self employed specifically. Rates are generally not dependent on this(at least in ANZ), assuming your tax returns are showing enough income to service. But if that is not case then research will need to be done to hunt a good deal or even obtain credit for your particular situation.

      • +1 vote

        As above, as a self employed person it's been suggested by a couple of mortgage brokers that it is harder to get a good rate. This is not the case?

        •  

          I have an existing mortgage 16 years in but it is Lo Docs and I'm paying over 5%… maybe time to review my financials.

        • +2 votes

          You may be going to lenders that do not need financials and do low doc. They take a bigger risk and hence why charge more in interest to cover the risk.

        •  

          If you have 2 years financials then it should be ok, but if you use LowDoc lenders then they will charge a higher rate.

      •  

        I work in collections for big 4 and so often I see self employed people fall behind on their repayments because they tell me their income is inconsistent, people don't pay them on time or their work is seasonal and they have periods of downtime where they can't service the loan. Obviously these types of problems don't come up if you're on a stable full time salary.

        So do self employed people not get scrutinized more? Do you look at consistency of their income over an extended period of time? Because if someone's income comes in in large chunks every 3 months, that's not so good for monthly repayments.

  • +1 vote

    I'm using a mortgage broker at the moment.

    Should I also pay a visit to my bank?

    • +2 votes

      If he is working hard for why would you. If he is doing a good job. You should hold your end of the bargain too.

  •  

    How is the risk appetite for unusual properties? e.g. next door to a phone tower / electricity tower / water treatment tank; on a very steep slope; very unusual architecture like A-frame houses; something that makes it harder to compare the value with neighbouring properties that are more normal

    As long as the valuation comes in around the price paid they don't care? Or are there things they stay away from?

    •  

      It is only 1 little piece of the puzzle. The security has a risk with these factors but let's say if you are only borrowing 60% of the values of the property and you have heaps of spare cash evry month. The the security risk is mittigated in my opinion. But again depends on the policy of the bank you are dealing eith too. Bigger banks normally have a bigger apetite for risk.

  •  

    Thoughts on the online lenders (Athena, ReduceLoans, Loans.com.au, etc) vs the big four (NAB, ANZ, Commbank etc)?

    With an Ozbargain brain its hard not to put the focus solely on the lowest rates possible with the online lenders.

    • +1 vote

      Depends on your situation too. If the loan is small let's say only 300K. There will be refinance costs involved. And if some bank is giving you cash back of $2K. That may work out to be better solution. So the numbers have to be worked out according to your situation.

      Also these guys have a very limited proposition. They cannot cater to complex situations.

  •  

    Possibly sensitive question so don't feel any need to answer if you don't want to, but what are your thoughts on the property market in the short to mid term (i.e. next 2-3 years)?

    Do you think that the moves by the government and the RBA are enough for the property market to recover back to having stable (not necessarily high/very high) growth, or do you think there might be more fundamental issues with the economy that mean the property market has hit a local peak and won't have room to grow for the time being?

    • +1 vote

      To be honest I have no clue. I read a lot of news about these things and all the experts have an opinion. I think this is above my pay grade to answer 😊.

      • +1 vote

        and all the experts have an opinion.

        That's a good point, I haven't noticed any kind of consensus either so very possibly absolutely no one knows.

        •  

          Have you ever seen a consensus of opinion on anything financial?

          •  

            @MrBear: Hahaha, well, sometimes you have some kind of majority opinion. Or at least leaning the same way. On the property market right now, I've read everything from "Australia's on its way to a recovery" to "It's still shafted…"

            • +1 vote

              @HighAndDry:

              from "Australia's on its way to a recovery" to "It's still shafted…"

              Lol. yes, but they've been saying that for 20 years, so i guess that is a form of consensus…

  •  

    How easy is it to get a smallish mortgage (180K) when using super to buy property?

    •  

      Not many banks do self mamanged super fund loans now a days and not many brokers know how to do one. I myself have never done a SMSF loan so not really sure how it works. Tje experienced ones may charge you fee to organise this. Because the comission on small loan is not much for a broker and their effort and experience may cost you money.

      •  

        Thanks for that.

        •  

          All banks (esp. the Big 4) are out of SMSF lending.

          I think there are now 2 players doing it.

    •  

      General consensus I have read is that buying property in super is risky as it really hurts your diversification. Even 'just' $180k as part of a $1m portfolio is 18% of you income generating assets in one very specific sector that isn't very liquid.

      You need to diversify across many sectors and then many assets within each sector for real diversification. I.e. financials, tech, medical, property, retail, telco etc. Having 18% in one sector can be risky but if then 100% of that is in one asset it could be diabolical. I.e. 18% in tech stocks or financials might be ok but if it is all in one bank or one tech like afterpay the risk skyrockets.

      Some would say that if you own or are paying off a house then you already have all the property diversification you want. If your home is in Australia, your job is in Australia and you are considering buying an investment property in Australia you should stop and think how all those things can be effected by a downturn in the local economy.

      If you really want/need property in your SMSF for diversification then have a look into REITs, none of the owning a property headaches(blocked toilet at 2am…) and costs/fees plus you are at least diversified across many properties that are often spread across commercial, industrial, government and farming assets! You also don't have to commit a massive amount in one hit so can get a better balance.

  •  

    What would be a "sweet spot" in terms of LVR? (eg 90% LVR ..etc..) And also, how stricter has home loan lending been since the RC?

    •  

      Just based on experience I have noticed that LMI jumps quite significantly after 90% LVR. But again depends on property type, area etc. So discuss these options with your lender to find the sweet spot for your particular case. I would normally have this discussion before full approval in case of purchase.

      RC- things were done way too tight, making it ridiculously hard around 1 year ago. No they are bit relaxed but not as easy as they used to be before RC.

  •  

    Have you ever got a loan approved for a sub 40sqm appartment with LMI?

  • +1 vote

    Assuming you have plenty of equity when refinancing, if you top up your mortgage to consolidate personnel loans do the banks consider this improvement in your serviceability calculation?

    • +1 vote

      Yes they do. The personal loans are normally for shorter term so yes it increases cash flow when you refi them into home loan.

    • +5 votes

      I am sorry mate but the situation is not making any sense.

      What are the 4 profiles for?
      Why would you construct house using business loan?

      Also, real estate business is very specialized business.

      Discussing loans for small business is very hard via this channel. Probably reach out to a banker to discuss. You can search for one on google.

  •  

    What happens if bank valuation comes in under purchase price? A bit under… (few thousand) to a lot under (50k+)?

    • +1 vote

      The LVR(LOAN to value ratio) will change accordingly. So customer has to put more cash in to bring it acceptable level. You can always try a different bank though. Valuations do vary.

    • +1 vote

      Quick point on this. It can sometimes provide an opportunity to return to the vendor and renegotiate (assuming contract is still conditional). This is incredibly uncommon so if it happens it would be worth asking. Alternatively approach another lender and another valuation will be done.

      • +2 votes

        No negotiation at auction though…

      • +1 vote

        Very fair point. If it is a private sale. Wouldn't hurt trying to negotiate on the basis of valuation.

  •  

    Do banks look at the NPI for loans or just Equifax reports?

    •  

      What is NPI? I hope that answers the question 😊. Not sure if it is one of the other credit bureaus, if it is then yes some banks do refer to others but mostly it is equifax.

      •  

        National personal insolvency register

  •  

    Why do banks offer better rewards for refinance loans rather than brand new loans?
    Like $2k bonus when refinancing with a bank which isn't offered when you start a new loan with that company.

    Is a loan easier to get approved the lower the LVR?? Like 40% LVR vs 60% LVR

    •  

      Honestly I don't know and don't care too. I would rather play game by the rules and maximize the benefits. They possibly invest in the fact that people get busy with their lives and don't tend to review such stuff regularly.

      Regarding LVR you are right. Lower LVR means lesser risk and better chances of approval.

  •  

    Do you guys / Will you guys check if a borrower has any overseas assets i.e any mortgage in New Zealand for example ? if borrower was applying for a home loan for the first time ?

    • +1 vote

      I am assuming that you will declare that on your statement of Financial Position. So yes we will look into that.

      BTW mortgage is not an asset 😊. But I think I understand what you are trying to say 😊

      • +1 vote

        I think they are asking if they don't declare it.

  •  

    Hi. We have a 400K mortgage (current number) with Westpac for the last 10 years. Our taxable income is about 60K combined. Last 10 years parents gift us half and we pay half of the mortgage monthly. We really want to change lender to get better rate but with our Tax documents, looks like it’s not possible. We can’t have a guarantor, we can’t have better income number quickly. No savings. What is your advise to be able to change lender, as Westpac rate is a lot higher than other small lenders? 10 years ago we had Low doc loan, but nowadays it’s almost dead. Thanks

    •  

      The information you have provided is not enough to come up with a solution. PM me if you want to discuss the situation in detail.

      •  

        Don’t know how to PM. But what more information do you need? I don’t need you to go into specifics but as general advice. Simply put, our combined income is not enough to be able to refinance with other lenders, considering the current loan is 400K. We have been stuck with Westpac, but we get through fine with paying the mortgage because we have parents help (and renting 1 room out). If Low doc loan is still available we could look at that option, as long as the lenders have better rate than Westpac.

        • +4 votes

          Ring up Westpac, tell them you want a payout figure for your loan. They will ask why, you say you are going to refinance to someone like Mac bank 3.24. you would prefer to stay but the rate difference is too much. Then hopefully they will come to the party and reduce your rate.

          •  

            @2ForTheMoney: I assumed it's already done, considering he is stuck since last 10 years.

            • +5 votes

              @GuyfromMelbourne: Negotiating with the bank is never done, it's an ongoing wrestle and if you let up they will bend you over.

              I call the bank every year at tax time or every time the bank runs a promotion for new customers only that's better than my rate.

              I knock off a little on the interest rate time everytime.

              The noisy wheel gets the grease.

          •  

            @2ForTheMoney: I thought there is no payout figure now? I am with them 10 years, should I be able to exit without penalty? But the problem remains, I can't really move due to income figure. Will try to renegotiate again, last time few years ago, they wouldn't budge.

        • +1 vote

          Low Doc loans are not designed for the purpose you are describing. Do low doc loans exist? Yes they do. Would you be able to get one? I don't know until all the information is available.

          The only advise I can offer in this situation is reach out to a broker because he/she will do the work and see if they can get you a better deal.

          Info missing:-
          Do you have dependents?
          Tax works on individual incomes, your combined income is not enough to help.
          What rates and product you currently have.
          What other liabilities do you have.
          What is the value of property.
          Are there other loans or assets in this situation.
          Who is on the title.

          This is just a little list that could get bigger once we start discussion.

        • +1 vote

          @living4music

          with the info you've given no lender would take you on.

          your income is not enough to service the loan.

          •  

            @sweefu: That's the issue, even though we have been servicing the loan quite fine in the last 10 years, never missed payment. Equity is about $100-150K since the price has increased.

            • +1 vote

              @living4music: doesn't matter now, esp. after the RC.

              edit after Op. - I am saying if you cannot service, it does not matter what other circumstances you have, banks will almost always deny the loan.

              But you may as well try with a broker.

            • +2 votes

              @living4music: Trying won't hurt. Reach out to a broker and see what can be done. Wouldn't cost you a cent anyway.

      •  

        I think you have PMs disabled?

        •  

          Thanks mate.. I have enabled them now.

    • -1 vote

      You will struggle

      •  

        I am struggling to move lender, not to pay the mortgage as we can pay half and parents + 1 room for rent can pay the other half.

        •  

          That's the thing. On paper your income isn't able to service the loan as you are relying on your parents to pay half of it. That's risky for lenders because things can change very suddenly and if your parents stop paying their half, it becomes impossible for you to service the loan.

          If someone loses their job, they can probably eventually find a new job and catch up. If your parents decide they are no longer paying for half your payments, you don't have any options to recover. And history of payments is no indication of future stability when it comes to family/personal matters.

          You can try to refinance and add your parents to the loan as joint borrowers. That way they are officially liable for the debt as well and their income/assets are factored into the assessment.

  •  

    What's the best way to increase borrowing amount (access equity) so you can use the extra cash for renovation?
    Is there costs to this?

    e.g. Total Loan 800k, would like additional 50k

    •  

      Top-up 50K on existing loan. You will have to do pretty much the whole process. And while you are at it. Negotiate your deal and see what best you can get.

      Should be very easy to top-up assuming your income and equity stack up.

      Costs depend on what product you have. For ANZ I know them on top of my head but for others I will have to read the fine print or ask the person who processes the file.

      Normally with this much lending, you might have a package if you are with big 4. And the package covers costs. Only fee you pay is for title search. That is govt fees and less than $50. The exact amount depends on state.

  •  

    IF a loan is significantly under 50% LVR, wouldn't it be dumb for a bank not to approve any kind of loan?

    Basically if the customer defaults, you make more than double the amount of the loan by selling the property, basically no risk free money for the bank.

    I'm guessing it's due to regulations ?

    • +4 votes

      That is very wrong thinking.
      Yes, there are regulations first of all.
      Secondly, bank does NOT want to sell security properties and make money.
      Thirdly, after recovering loan money they will have to disburse the leftover funds to customer anyway, so no profit there.
      There are a thousand steps(not literally) before bank decides to sell property.

  • +1 vote

    Hi op, Thanks much for taking the time to do an ama

    Do banks still care if you get an owner occupier home loan for an investment property? The way I understand it was kinda don't ask don't tell. Has this changed since royal commission etc

    And

    Potentially could I use an owner occupier loans for multiple investment properties

    Cheers! You're an absolute legend

    • +2 votes

      Interesting topic 😊.

      The products for Inv and Owner Occupier are still different and yes Inv options are expensive.
      Do banks still care? Yes they do.
      The purpose you mention for borrowing money is what defines the product. And security can be anything. I think this is where most people get confused.
      You can have Inv property as security and loan product as home loan. Or the other way around too.
      And I guess the best way to describe today's situation is the way you mentioned. Don't ask don't tell.

  •  

    I have five properties. If I move to ANZ, can I get 5*300,000k points?