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COVID19 – Advice and guidance for finance hardship applications

Over the past 2 weeks we have fielded numerous enquiries from our clients with questions and concerns about how to approach lenders for hardship support relating to COVID19 and the impact this may have on their mortgages, rates, credit histories etc.

To ensure our clients get the most accurate advice, AXTON Finance have been in regular contact with the banks and lending institutions we work with and with whom all of our clients have mortgages.

In our earlier communications we noted that a hardship repayment holiday is not ‘interest free’ and that such a holiday may extend the term of the loan or the interest you pay over the life of the loan. As such, it is important to understand what this means for your long term, and that if you have some capacity to make repayments towards your loans, then it may serve you well to do so.

The encouraging fact to note is that all lenders have in place support for borrowers to receive repayment assistance.

The most important action anyone can take under these trying circumstances is to proactively communicate with your lender, and to do so before any repayments are delayed or missed.

Banks and lenders approach and support to hardship is evolving, and as we write this, most lenders are treating the conversion of a principle loan repayment to interest only as ‘credit critical’ (this means such a change to your loan contract will only be permitted through a full assessment via a loan application). There is some political push from the government towards the banks and lenders to simplify this process, however as it stands a full assessment is usually required.

What is useful to understand, however, is that in applying for and obtaining hardship assistance means whilst it is not necessary for you to make a repayment during the hardship period, you may be permitted to.

The upside here is that in remaining under a P&I agreement, you will be incurring interest at a lower rate (Interest only terms tend to be priced higher for risk). So you may effectively be getting interest only terms at a lower rate without actually needing to go through a full loan assessment (providing you meet the hardship criteria).

There is some inconsistency between lenders as to how they treat the repayment. Some lenders advise these payments will be available for the borrowers during and after the hardship period if they needed to redraw. Others have advised these are not. So it is very important to ask your lender what availability you will have to cash paid into your loan during or after a hardship period. They may even take the view that if you can make a repayment, you may not qualify for hardship…

New loan application, current applications…

Most lenders are quickly updating credit policies to accommodate risk associated with COVID19 and request additional information and explanation around job type/industry to identify is this may impact ability to repay in the near future. Some lenders are asking applicants to provide disclosures and confirmstaions along the following lines:

The COVID-19 crisis is causing significant social and economic disruption. Applicant(s) to advise how they foresee this affecting their current financial position (including income) and how they will financially navigate that affect. This approval is subject to the Lender understanding and acceptance of this affect.

To Summarise:

  • Be proactive with your communication, ask for assistance before you miss a repayment;
  • Understand the impact and accessibility to any payment made during a repayment holiday;
  • If there was no loan conduct issues prior to COVID19, any hardship or repayment holidays granted as a result of COVID19 impacts will not effect your credit history;

Impact on Credit History

Borrowers who are granted a six-month deferral on loan repayments will not have their credit rating affected as a result of the holiday, so long as they were up to date with repayments prior to the economic impact of COVID-19.

“If a customer is granted a deferral on their mortgage and other credit products because of COVID-19, banks will report customers as not having missed a repayment, provided they were all up to date when granted relief,” explained ABA CEO Anna Bligh.

As always should you have any questions we are here to help – while we may be working remotely during this time please call the office on 1300 706 540 and one of our team will be able to help you.

Take care out there!

James Hardiman I General Manager

AXTON Finance

Photo by Branimir Balogović on Unsplash

COVID19 – AXTON Support Page

Firstly our small team at AXTON Finance hope that you, your friends and your family are looking after yourselves during this time. Please listen to government advice on how you can play your part to keep yourself and others safe during this pandemic.

Australian banks and lenders pitch in

On Friday 20th March The Australian Banking Association (The ABA) announced a unified response to assist Australians during this crises.

Below is a summary of COVID19 links available from each lender in the Australian market place.

This page is being updated as more information comes to hand.

Key points to consider – our brief summary

– The term ‘repayment holiday’ SHOULD NOT be interpreted as interest being waived. It is only repayments (interest) being deferred. You still have to pay the capitalised interest added to the loan balance in the future.

– Qualification requirements are likely to apply (eg unemployment, significantly reduced hours, at risk industry etc)

– Our opinion is that the deferred repayment should be used where genuine hardship is being experienced or is expected. In the long term adding (capitalising) interest for six months or more can add a significant amount of interest to your total loan cost.

– Most lenders are offering up to six months relief in repayments. Some are offering up to three months with a checkin at that point for a further three months.

– Credit reporting agencies and lenders have already outlined that the hardship arrangements are typically not reported as defaults, and therefore do not impact a borrower’s credit score, with APRA also stating on Monday 23rd March 2020 that banks need not treat repayment holidays as arrears.

– The very cheap fixed options we are starting to see should be considered carefully. Often you cannot make extra repayment on a fixed rate, there is often no redraw and expensive break costs can also apply should you pay the loan out early.

– It may be economical to consider refinancing to a new lender to take advantage of cheaper rates, a new interest only term or one of the current cash back rebates available before you simply defer your repayments.

Speak to your AXTON broker if you would like a mortgage review (click here for a free review) or to discuss any of the points above.

Useful COVID19 Lender Links

ANZ

CBA

Westpac Bank

NAB

Macquarie Bank

Bank Of Melbourne (click link on main page to COVID Information)

Bank Of Queensland

Firstmac

Resimac

Pepper Money

Liberty

ME Bank

ING

BankWest

Suncorp

If in doubt or if you just want to chat about your situation please contact your mortgage broker to assist where possible.

Contact details are as follows:

Our office number (1300 706 540) is still actively being monitored as we run a full VOIP system and can be contacted as per normal.

Many thanks

Your team @ AXTON Finance

Photo by Branimir Balogović on Unsplash

10 tips that can help your mortgage application

As you have probably heard in the media the nations lenders have clamped down on their lending criteria as a result of pressure from various government agencies like APRA and ASIC and from recommendations made during the Banking Royal Commission into banking misconduct.

It would be fair to say that many lenders have perhaps taken this a little too far which has resulted in a market place full of inconsistent applications of an incomprehensible set of rules for borrowers to deal with.

As a result of this we felt that the following information can be used as bit of a guide to help maximise your chances of securing finance approval by implementing any number of the following tips.

1. Fill out your application form in full

Lenders will often apply a score to your loan application based on the information you supply and if you skip on optional questions this can be detrimental to the strength of your application if things a little tight. For example even if you have a savings account with another bank with a small amount in – tell your proposed lender. If you have a middle name don’t forget to include it – it matters. If you have moved a couple of times try and be accurate with your living history as lenders often marry up data they can see on your credit file with the information supplied in your application.

If you are looking to refinance or buy your next property check out client fact find here – this is a fantastic form which is responsive to asking you the questions we know a lender will want to know – nothing more and nothing less! We can contact you after you have completed to run some tailored options past you.

2. Don’t submit your application to too many lenders or brokers

Lenders get very concerned when they see on your credit file that you have applied to a number of credit providers within a short period of time for about the same amount of money. The lender in question will often take the pessimistic view and think that there is something wrong with your application and has been declined by other lenders prior to it so will pick over your file with more detail trying to find out why you would apply so many times.

3. Do you have credit defaults?

This might sound scary and a reason for a lender to decline a loan but many lenders have different policies that may consider your scenario depending on the circumstances and what you have done to remedy the situation. As a general rule of thumb defaults from utility providers like power and telecommunication companies have less impact on your scenario than do defaults on financial service providers like personal loans, credit cards and home loans.

It is important to realise that with the evolution of the positive credit reporting regime lenders can now increasingly see the conduct of other institutions credit facilities. So if you are late on your credit card payment with the CBA and your home loan application is with Macquarie Bank, then there is a good chance that they can see this on your credit file down to which months you were on time and those that were not!

Treat your repayment history with a healthy level of respect and you will find your application will run pretty smoothly. A good mortgage broker or banker will be able to work with you prior to submission to identify any sort of severity and work out the best course of action and the lenders most suited the scenario you have presented.

If in doubt you can get a free copy of your credit file from mycreditfile.com.au (a service from Equifax Pty Ltd). We can take a look at it for you free of charge and provide you with some insight – feel free to contact us here.

4. To Afterpay or not…

The advent of the ‘buy now and pay later with no interest’ companies like Afterpay and Zip Pay creates an interesting situation for lenders. In simple terms these are not seen as a great look on your bank statements because the lender makes the assumption that these often relatively low cost purchases were made because you did not have the money in the first place and with retailers quick to jump on the band wagon with this offering its even available on products and services that may be considered essential. Our recommendation is generally not to have these buy now pay later arrangements if you are seeking to make a mortgage or finance application.

5. Support Docs

You will of course have to supply items like payslips, ID, mortgage statements and tax returns etc depending on your situation. This often slows down the process when the information requested is not provided in a timely manner. Many lenders simply get to your file and if information is missing they request whats needed and place your file at the back of the queue again. Sometimes information supplied can result in additional questions being asked so be prepared for this to happen and its nothing unusual albeit it can be frustrating.

6. How much do you spend?

OK I get it that a budget is boring but again an increased focus is being made on just how much borrowers are spending on living expense and there is a general reduction on the reliance of HEM (Household Expenditure Measures) standards and a more tailored approach. Having a summary ready before your finance meeting will help you have a more productive and realistic expectation of your borrowing capacity for any sort of approval. There are often many ways that you can reduce and improve your living expense without making drastic changes in the months lading up to when you are looking at securing a mortgage. Go through your statements and look at where you may save money via;

  • Reducing utility bills by shopping around suppliers
  • Reducing or eliminating credit card debt
  • Do your food shopping with a list and don’t buy by impulse
  • Take a packed lunch (this $10 per day can save you $216 per month in after tax dollars!)
  • Love coffee (so do we) but consider a pod machine or something similar over the 4.90 large flat white with almond milk once or twice a day
  • Pay yourself first (savings) – putting money away first before you pay for everything else is a simple yet powerful process to help you get ahead. Think of every time you get a pay rise how easy it is spend that new amount of hard earned cash! There are some great online tools that can help with this. One that we love is Raize.com.au and ING Bank – these two companies have variations of a system that automatically squirrels away savings by rounding up your purchases to the nearest dollar and allows a regular savings plan. Simple, effective and above all – happens without effort. (note if you click the link above to Raize you receive a $5 credit to your new account as do AXTON Finance)

7. What happens if you are having or planning for a child

Lenders are now required to ask about any expected changes to your future income that may affect your ability to meet repayments. This of course is a requirement to be answered truthfully and is strengthened by your ability to provide other information about how you may deal with such a situation. For example if you are about to go on maternity or paternity leave you could state that you have a certain amount of funds available for the estimated period of you being on reduced income to meet the commitments of your loan. A return to work letter and using a lender with a strong appetite for this sort of scenario will also help you a lot.

8. How good is your mortgage broker or banker?

Of course we may be a little biased here but having an experience broker working with you will help explain things in plain English for you and be across the lending policies of dozens of lenders and not just one (like you would get directly at a bank).

The quality of your application submission that is made by your broker or banker can really dictate how smoothly your application goes. Do some simple research like looking up your preferred broker or banker online through Google, LinkedIn and the other usual social media links. Usually you will get a pretty quick impression as to how experienced and professional they are. If in doubt trust your instincts!

9. Consider the wider market

It is often that the more competitive products and policies lie outside the big four banks. Well over 50% of all mortgage lending goes to just four of the major banks. At AXTON finance, only 20% of our lending in the last six months has gone to a majors! There are better deals to be had if you are willing to look outside of the square it can save you tens of thousands over the life of your loan.

10. Is the cheapest rate the best?

A business mentor once told me of the following three things;

Good, fast and cheap…. pick two. It is impossible to have all three. 

Wise words to live by indeed.

A quick search of the internet may list some amazing rates that look too good to be true and while it is still may be worthwhile considering you should also think about;

  • How volatile is that rate online? Sometimes a great rate may be unsustainable for a lender to offer for a long term and you end up getting rate creep with increases outside of RBA changes. While you will be rather annoyed if this happens it would be good to understand what sort of history has been evident with the lender in question?
  • Does the lender’s computer say NO?.  In many instances lenders try and shoe horn customers into rigid processes with offshore credit decisioning driven by computer systems. If you fall outside of this sort of lenders policy due to any complexity then you want a human with experience going into bat for you. Paying an extra 0.1% or 0.2%pa in rate can often mean the difference between submitting to a lender who may view your application as being poor versus another one that is fine with your set of circumstances. Use a quality mortgage broker who understands the rules to maximise your outcomes and reduce your stress.
  • Does the lender have a good application and onboarding process or is it a process with baked in systems that worked in 1991 when fax machines were cool? This can have a significant impact on turn around times – a good broker will have excellent experience of this fist hand and can guide you.
  • Cheap online specials often blow out credit application queues resulting in turn around times that can take weeks (even months). Currently there is one lender that is out to almost 20 business days to pick up a file – do you have that sort of time to wait?
  • Enquire about what sort of service the lender has with clients. A quick look up of reviews online can give you a feel about one lender over another. However read with caution as people often use the internet to complain and rarely to praise.
  • Ensure that you understand the product that you are seeking really does have the features you need. There is no point paying for stuff you are unlikely going to benifit from if there is a cheaper and/or simpler product available that does what you need it to?

So there you have it – ten tips on helping get your mortgage application approved!

Please feel free to contact us on 1300 706 540 and ask for Clint or one of the team to help you out. We a sure you will love speaking to an experienced person and not a call centre!

Best regards,

Clint Waters
0422 464 353
AXTON Finance

That winning feeling for Steve & Cas

We are really pleased to share on our blog this great video documentary produced by Realestate.com.au in conjunction wtih CUA about the buying journey of two long term Axton Finance clients, Steve and Cas, who successfully sold their smaller home and replaced it with a larger family home in Surrey Hills.

It was a pleasure to say that we were involved in both their first purchase in 2011 and then this one at the end of last year.

While bidding at auction on the day is the culmination of weeks and often months or years of hard work and research it underpins the importance about being ready. It is of course critically important to secure the right advice about your mortgage and finance options so that you can move forward with absolute confidence.

We loved Cas’s bidding style – well done guys!

Check it our here

https://www.realestate.com.au/…

2017 Connective Excellence Awards Winner

Axton Finance is pleased to announce that we have been awarded Mercury Hero in the 2017 Connective Excellence Awards, in the face of some very stiff competition.

This award recognises our innovative use of their Mercury technology platform that drives fast home loan approvals and better client experiences.

Connective Excellence Award Winners are chosen for their expertise, integrity and outstanding customer service standards. Axton Finance is very proud to accept this award and be recognised amongst the best of the best in Australia’s mortgage and finance broking industry.

Connective is one of Australia’s leading mortgage aggregators. Collectively, Connective brokers write one in every 10 Australian home loans.

Proudly sponsoring The Hawthorn Citizens Junior Football Club

Axton Finance is proud to announce their sponsorship of the Hawthorn Citizens Junior Football Club for the 2017 Season.

The club was born out of the Hawthorn Citizens Youth Club, which commenced in 1944.

They are a community based, grass roots footy club that has grown over the last decade to 19 junior teams and around 400 players.

You can check out the club at their website here.

We look forward to taking part at some of their community events at their local home ground at Victoria Road Reserve – Victoria Road, Hawthorn East.

 

 

Axton Finance wins at Connective’s Level Up Conference

We are very proud to announce that Axton Finance won Connective’s Brokerage of the Year <5 Staff VIC. Thank you to our great team and clients who supported us over the past 12 months.  Contact us here or ring on 03 9939 7576 for all your mortgage and finance requirements.