Here are the mistakes that might cost you a mortgage

Friday, 26 July 2019

Upping mortgage payments by $10, $20, or $30 a week makes a huge difference to the time it takes to repay the loan, and the total interest paid.

Getting a mortgage is not as easy as it once was, but mortgage brokers say there are some things would-be borrowers do that make it harder.

Here are four mistakes to avoid if you're looking for a loan.

Bad account conduct

If the bank can see you have regularly been going into unarranged overdraft or missing bill payments, it's a big black mark against you.

* Home loans still possible after no-asset procedure

* Borrowers turn their backs on the banks**

Cam Hastie, of mortgage brokers Go2Guys, says this will often 'kill a deal dead', particularly if the borrower has a small deposit.

John Bolton, founder of Squirrel, says it is not always that people are 'bad', or even that they can not afford the loan, but that they are not managing their money well.

Carrying debt

Hastie says even if you make all your repayments, having a lot of consumer loans can also be a problem.

'Are you the kind of person who funds their lifestyle with debt or do you live within your means?'

Get your application sorted early to give yourself the best chance of success.

Servicing other loans reduces the amount of money you have available to pay off the mortgage.

Hastie says in expensive markets like Auckland, people needed as much servicing capacity as possible.

Bolton agrees people should usually get rid of their other debt before applying for a mortgage.

Many people do not think of student loans as a problem because they are interest-free. But they can have a dramatic impact on a person's servicing ability.

If you lose 10 per cent of your net income each pay to your student loan, it reduces what you can borrow.

Bolton says one of his clients has cleared the last of her student loan and freed up an extra $1000 a month of income, which means she can borrow an extra $150,000.

Hiding things

John Bolton says banks don't like applications from people who don't manage their bank accounts well.

Hastie says people are sometimes worried about being judged, or are embarrassed about what the bank will find, so they try to hide things.

But anything that is concealed and then discovered will reduce a bank's confidence in a borrower.

'Lending is a confidence game … if you're throwing questions into their minds when they are looking at you, you're putting barriers in front of yourself.'

McLeod says people sometimes forget things they should disclose.

'Before we send anything off the team goes through statements and sometimes we'll end up saying 'have you got a Gem Visa'.'

Hastie says banks will go through statements 'almost line by line' to see if people's outgoings are what they say they are.

Bankers' Association chief executive Roger Beaumont says it was important to be '100 per cent open and honest' in an application.

'Banks don't ask the detailed questions about your household expenses because they're nosey. They ask because they want to make sure customers have the ability to repay the loan.'

Not putting in the best application possible

Brokers say it is worth spending time getting 'dressed for success' and fixing problems with an application before submitting it.

McLeod says clients are sometimes told to close an unused credit card, or make other adjustments to how they operate their accounts.

He says people can get advice from brokers about which lenders will have the most appetite for their type of application.