If you’ve lost your job and you’re not sure whether to hit pause on your mortgage repayments, or you’ve got a loan pre-approval but you’ve heard your lender may do a backflip, one of the best people to guide you through the finance maze is a lending specialist.
A lending specialist will generally have access to more product options for you, and also be better placed to guide you through the application process. Lending specialists will be right up to date with credit policy changes and relief packages available to borrowers. The best lending specialists also know there’s not a one-size-fits-all solution as COVID-19 creates economic and emotional havoc.
“We’ve got customers in all sorts of financial situations right now,” says LJ Hooker Home Loans Head of Product & Marketing Jeff Chapman. “We can help you understand what your options are, what the implications of a payment holiday are. Our lending specialists can help you think through and work through those options.”
What to do if your income has taken a hit
Before you take up your bank’s offer to temporarily freeze your mortgage repayments, it’s important to be fully aware of the implications.
“First up I will say that while it’s tempting to take banks up on their offer of a home loan repayment freeze, my general advice is to be cautious and do what you can to keep your loan repayments up for as long as possible,” says Mark Lancaster, franchise owner and lending specialist at LJ Hooker Home Loans Brisbane Outer North.
Mr Lancaster says a lending specialist can walk you through other options, which might include switching to the minimum required payment, reverting to interest-only payments and consolidating other debts at higher interest rates into your home loan to reduce your overall repayments. You could also redraw advanced repayments or use savings to cover your loan.
“People will often feel bad about dipping into funds reserved for an emergency, but if there’s ever an emergency, then this is it,” he says. “That’s what a buffer is for, so don’t feel bad. When things return to normal, you can build up your buffer again.”
For those without savings or for whom these measures aren’t applicable, a lending specialist can help explain your bank’s relief packages. Most lenders are offering three or six-month payment deferrals and nearly every lender will add the accrued, unpaid interest to your loan balance, increasing the amount left to be paid when you come off the freeze.
Should you refinance?
Mr Lancaster says those who have been affected by job losses, redundancies and step-downs are usually best to negotiate with their existing lender rather than jumping ship to a new lender.
“Our first port of call is to take a look at a customer’s current position, but also keep an eye on the future. Times may be tough now but we will move through the current situation so ensuring we help our customer’s long term is also vital.”
Mr Lancaster says a lending specialist can do the sums to ensure a refinance is your best option.
“Quite often people jump into a refinance without doing the groundwork to determine if that will save them any money, so we do our due diligence on that,” he says. “We work hard to make sure the customer doesn’t have to do much work.”
Mr Lancaster also mentioned the current position potentially facing many landlords. “This is the time to look at all their options and get good long term guidance. Things may not be as dire as they first think.”
Mr Lancaster agrees that considering your current lender and what options they can offer needs to be an important part of any considerations.
Can you still get a home loan?
Mr Lancaster says if you’ve lost your main source of income, it will be challenging to get finance.
“We are seeing changes to lending policy and, with the unfolding situation, there is a more conservative approach to comply with responsible lending,” he says.
For those with stable employment, a lending specialist will have access to wide reaching lending policies and can help customers navigate options and help you get a good deal.
“We know the credit appetite for a customer’s individual circumstances,” Mr Lancaster says. “New applications have slowed down, but they are still happening so it’s definitely worth exploring what options you’ve got available to you.”
Mr Lancaster says if your household has been reduced from two incomes to one, there may still be options for borrowers.
“I had clients last week who had been ditched by their current lender after being pre-approved,” he said. “They had already bought. The male applicant worked in an industry that was deemed “risky” and the lender phoned them and said unfortunately they could no longer assist them.”
“We spoke and this was actually quite a straightforward proposition for us. The female applicant was still gainfully employed, and we were able to determine that even without her partner’s income, we could find a solution by having an option to use 100 per cent of her tax-free income.”
Mr Lancaster says the market conditions resulting from the coronavirus pandemic may also present some good deals for opportunistic buyers.
“There’s a window for people who are in a strong employment situation with a good deposit,” he says. “But we are also seeing first home buyers getting more active as low deposit home loans are still available to people with stable income and employment.”
Mr Lancaster says if you were keen to buy before the virus knocked the economy for six and you’re feeling stressed, start by talking your situation over with your lending specialist.
“You can use them as a sounding board,” he says. “It’s better to talk to a professional lending specialist before you submit an application to a bank. That way you can protect your credit rating and your heart, because you won’t go out and fall in love with a property and then have the bank say there’s no chance.”