October 19, 2017
There's some sweet irony in an article where as director of a mortgage office, I am telling you our inability to help for certain situation. This is unique so read on.
Each day when I slug through traffic to work, I would hear advertisement along the lines of :
- "We'll save you"
- "Your home loan journey"
- "Better choices for a better life"
Predictions made by advertisement people. Smart people. Educated people. Thoughtful & optimistic people. And those same people will almost certainly be wrong for some borrowers where "We'll save you" becomes "We can't help", "Your home loan journey" becomes "Your quest terminates" and "Better choices for a better life" becomes "No choice, better life maybe in future.". I list 5 examples:
- Owner-builder electing to borrow funds in between construction. Most lenders will not lend to owner-builders. The few that do may only lend up to 60% of the completed value or 80% of the land value.
- Foreign residents of certain countries including China, Malaysia and India who are not Australian permanent residents. This deserves an investigation by the Equal Opportunity Commission but let's save it for another day. The only exception to the aforementioned is if the borrower is a very high net worth individual with private banking relationship of certain banks and can substantiate income in the country where he/she resides in
- Ninja i.e. no income, no job, no assets. It will not help even if you have substantial assets but no job and income. For residential home loan applications, the government banned asset lending post-GFC. In other words, income substantiation is required no matter how wealthy you are e.g. When borrowing 5% for a $5,000,000 residential property, income substantiation is required for lenders (& mortgage consultants) to discharge responsible lending obligations
- Land & building package involving a split package where the developers dictate the builder that must be used for construction. If the loan is approved, it's sheer luck whereby the assessor did not read through the full 100 plus pages contract
- Borrowing 100% for a standalone property without having a guarantor. Such loans do not exist. Even for a loan at 95% lend, it doesn't mean you only need to contribute 5% deposit. 5% deposit plus funds to cover stamp duty, legal costs and in most cases mortgage insurance would be required
The above is to outline the brutal reality in taking out a mortgage, not to casualise or gloat over one's unfortunate circumstances. What is harder? To know the truth or telling it? To find the truth or being believed?