Do banks take a conservative or aggressive stance on mortgage lending?


– Hi, it’s Connie from Prosperity Finance. How are you doing? Finally, finally, we finish lockdown and things start backing to normal. For us, we going back to office on Monday. My daughter going back
to school on Monday too, so we finally, this day arrived. But make sure we all keep distance. Take our responsibility, make sure we keep that
COVID-19 under control. So, well done on getting to this stage. Now, in this video, I thought I’ll just do a update
on some bank policy changes. There are some major changes. Also, I just discuss about the options, repayment option for people who taken the mortgage
holiday or deferment, and if now you feel like it’s time to going back to the normal payments, what are the option available for you? So, there’s a lot of information. So, please stay with me till the end. So, firstly, let’s talk about people who has taken mortgage holiday or convert from principle and interest to interest-only options. Now, if you think your cash flow okay, you comfortable to go back
to the normal payments, you can finish that early. In fact, I encourage you to
finish early, if possible, because you can save a lot
of costs down the track. Now, if you want to do that, you generally have two options. One is you pay more than before, so that you can catch up the loan term. For example, before the, sorry, the deferral option, you probably have 20 years to go. And now, if you want, make sure that you still have
19 years and 10 months to go, you have to catch up that payment to keep that loan term the same. But not everyone can pay more, right, especially not, some
people still getting 80% of their normal pay. Now, the other option would
be keep the same payment, but you may have to extend the loan term. It really depends your loan structure. Now, if you’ve been paying the minimum, which is 30 years loan term, then, unfortunately, you can’t extend it. You just have to go with the option one, which is to pay more. But if you were paying
faster than the 30 years, then now you can choose
to pay same repayment or even lower than what you used to pay, because you pay faster. So, you can extend the loan term. Right, so basically you
have these two options. There could be a third option, but they only happen to loans, if they’re coming off fixed-term, ’cause now the rates are
much lower than before. So, even you had to increase
payments as a result of taking the mortgage holiday,
or interest-only period, but the rates also drop, so it’s kind of a net off each other. So, that way you can
choose to pay the same, without extending the loan term. So, basically, you have
these three options. If you don’t know which one is
right for you, contacting us. Now, there might be some
people, job still not improve. The income still uncertain,
and you probably running out of the mortgage deferment,
or interest-only period, if you had less than six months in your deferment application, you can extend it up to six months now. So, have a look your situation
and see what’s right for you. Right, for people who now
ready to buying property again, here are some update
about bank policy changes. There’s some good news and
some bad news, unfortunately. Good news, I would say the
interest rate has dropped, right. All the banks has almost
adjust their rates. Some adjust one-year rates,
some adjust two-year rates, but every bank has adjusted rates. Now, at the moment the lowest rates for one year and two years, 2.79%, depends on which bank you talk about. The highest would be around 3.05%. But again, to make the good decision for your interest rates, you also had to take into
account your personal situation. And also, how you repays
is equally important. I will have a separate video
about the interest rate update, but I just want to give you a update. Interest rate has dropped. So, that’s good news, because your finance cost is going to be much lower than before. The other good news is that some banks, during the lockdown, only
assess the customer application for their own customer, meaning your income need
to be with that bank, cause they have limited resource. They have to dedicate a
lot of the time looking after mortgage deferment
applications, et cetera. Now, the capacity has been improved, so they start looking at
new-to-bank customers. So, that’s welcome news. Now, let’s talk about the downside. So, bank has tightened up some policies. So, what are they? In terms of income, like ASB, can only take into account
one boarder income, regardless how many you
are getting right now. And BNZ, they won’t consider
any boarder income whatsoever. So, that’s really sad news. Cause normally one boarder can give you between 80 to 100K of borrowing capacity. So, without that, your borrowing capacity from surfacing perspective, is going to reduce dramatically. Now, not every bank has this kind of, tightened up the boarder income policy, but we’ve seen two banks doing that. So, if you want to get a pre-approval now, you have to be really quick. Now, in terms of your job income, if you were impacted by COVID-19, and your income was reduced
during the lockdown period and now it’s improved, you need to get employer letter to confirm your ongoing income, so that bank get a comfort about your ongoing servicing ability. So, that’s the income side. In terms of LVR, we don’t see any major changes
in terms of LVR improvement. I heard Kiwibank allow
you to borrow up to 80% for investment property, but most of the bank hasn’t increased LVR for investment loans. And, in fact, this is going backwards. We got notice from BNZ
that some of the exception to LVR rules, such as construction loan, or off-plan property, or refinance, which are actually used to
be exempt from LVR rule, now they also need to be within 70%, if it’s an investment property only. So, it’s actually going backwards. And for apartments, construction loan, some bank also reduce their LVR to 65%. It used to be 70 for investment, or construction is LVR exempt,
but they are going backwards. It’s a reflection of the
current property environment. There’s a lot of uncertainty. So, that’s why when I did my LVR removal commentary video last two weeks, I predict that the bank
probably wouldn’t do anything at the moment to relax LVR, because we are in the
COVID-19 environment. There’s just a lot of risk
for them to increase LVR. So, that’s the investment property loan, but for first-home buyers,
there are good news. Before the LVR removal,
you may not be able to get a pre-approval, you
have to find a live deal. You sign a conditional offer, and then go to the bank
and get it financed. If you don’t buy that
property, your offer avoid. But now, because there’s no limitation how many loans can go over 80%, banks start opening the
pre-approval for high LVR, right. So, that’s good news. But you still need to have a
10% deposit most of the time. There’s some exception,
you can get away with 5%, but majority still need 10%. I don’t see a game-changer here, because before the LVR removal, if you have a good income,
you can borrow 90%. So, there’s just no change. So, that’s about LVR. So, in general, bank
are very conservative. And they will review their policy as things start to settle down. And they will constantly
review and provide update. So, same here. We’ll give you update
in the first instance if we hear anything. So, please subscribe off our
YouTube channel or our blog, so that you can get this
information directly, immediately from us. Right, thank you so much for watching. I hope you get some value from this. And if you think someone else
would benefit from this video, please feel free to spread the love. Thank you, I’ll see you next time. Bye-bye

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