A friend called me to ask for some Mortgage Advice...
...A colleague of his, after calling her bank, was feeling a little down.
Although she had been saving for some time and knew of others in a similar position that had got mortgages, her bank said that for various reasons she would have to wait.
As I pointed out to my friend, this was something that is far too common, as I have had similar conversations with people I meet at open homes.
Often that is the case, they need to sort something before their bank will advance them the money required to purchase a property but they should remember that not all lenders have the same credit policy, in fact I would be hard pushed to name any two alike.
Would it then be advisable to contact a mortgage broker if your bank turns you down? Defiantly, it is always advisable to get a second option however; I would recommend you contact a mortgage broker in the first instance.
Sure not all banks deal with mortgage brokers so if yours doesn’t there is no harm in contacting your bank then going to a mortgage broker as a second option.
However, the risk in that is there is only one credit reporting agency that all lenders use and every time you make an application for credit it is recorded on your file for all to see.
So should your bank decline your application and you go to a mortgage broker and the broker lodges your application with another lender the first thing they are going to think is, if the application was turned down by their own bank do we really want to be looking at it.
Yes I realise that is a strange comment to make as all lenders have different credit policies but when I was working for a bank I heard that comment more often than not and the most frustrating thing was if you didn’t get it right first time, it was hard to turn them around.
It comes down to presentation as the people within credit departments are faceless and it is all down to what they can derive from the application opposed to getting a feel for the person sitting across the table making the application.
Also there is a large turnover of staff within the banking industry so it is probable that you may have someone handling your application that doesn’t have the experience required to read people.
For example, nowhere on an application form will you see the question; “How much if anything do you intend to increase your mortgage payments by?” Yet when I was working as a broker I would ask that very question every time, as so much can be derived from the answer which could make or break the application.
Another example, I would ask a client what loan term they would prefer.
If they said less than 25 years, say 15 years I would suggest we apply for a 25-year term which would make the credit people feel more comfortable as the budget surplus would be healthier, then after it is approved we increase the payment to the equivalent of a 15-year term.
Not only will that result in a better chance of approval it also means that down the track should something unforeseen happen you have the “right” to reduce payments in line with a 25 year term. Should you lock into a 15-year term you would need to “apply” to extend your mortgage and reduce payments, “big difference”.
I guess I should qualify my comments by saying I am not suggesting that banks turn down every independent application – far from it, and many people see value in dealing directly with them.
But if you are new to the property market, I am suggesting that, as with any other sector, you get independent advice before taking the plunge. It is common sense that you do and depending on the advice, you should start off in a better position.
Brian Dalley is a leading Property Consultant | former NZMBA Mortgage Broker, and Real Estate Agent.
Update: Since writing this post, I decided to write a quick report with a bit more information.
Click here to go to the download page to get this Free '2-minute' report.
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