Advice for loan approval post APRA

Discussion in 'Loans & Mortgage Brokers' started by Ketsle, 4th Feb, 2019.

Join Australia's most dynamic and respected property investment community
Tags:
  1. Ketsle

    Ketsle Well-Known Member

    Joined:
    3rd Sep, 2018
    Posts:
    205
    Location:
    Perth
    I'm going to buy a house this year and was wondering if any mortgage brokers could chime in with any tips on what lenders are potentially looking for that could be a red flag in the approval process.

    I read recently that a lady had to provide another 3 months of bank statements because she made a purchase at a pet store but declared she did not have a pet on the mortgage application. Similarly i heard they can look at where you are shopping (Clothes/food) and even if you pay for a night out and your friends all pay you back, this can be an issue.

    So far i have cancelled any paid subscriptions to netflix/stan/spotify (Never even considered afterpay) etc and will continue to live more frugally until the application needs to be submit. Admittedly I dont really have any recurring payments as it is with the exception of rent/bills but any advice would be greatly appreciated.

    Fire away!
     
  2. Jess Peletier

    Jess Peletier Mortgage Broker - Australia Wide Business Member

    Joined:
    18th Jun, 2015
    Posts:
    5,431
    Location:
    Perth WA
    I suggest actually speaking to a broker so they can look at things on the whole - if there's red flags they'll be able to let you know well in advance. Some lenders are better than others when it comes to living expenses but YES what you've said above does happen. In my experience it doesn't cause issues with approval, it's just annoying to have to answer that type of absurd question.
     
  3. Terry_w

    Terry_w Broker, Lawyer, Tax advisor, Debt Recycle advisor Business Member

    Joined:
    18th Jun, 2015
    Posts:
    21,762
    Location:
    Australia wide
    Sounds far fetched. I would disregard what you read in the media.
     
    Hodge likes this.
  4. Jess Peletier

    Jess Peletier Mortgage Broker - Australia Wide Business Member

    Joined:
    18th Jun, 2015
    Posts:
    5,431
    Location:
    Perth WA
    It definitely happens - just not with lenders we'd usually use for investors.
     
  5. Terry_w

    Terry_w Broker, Lawyer, Tax advisor, Debt Recycle advisor Business Member

    Joined:
    18th Jun, 2015
    Posts:
    21,762
    Location:
    Australia wide
    I haven't got any experiences like that so far.
     
  6. Rolf Latham

    Rolf Latham Inciteful (sic) Staff Member Business Plus Member

    Joined:
    14th Jun, 2015
    Posts:
    5,311
    Location:
    Gold Coast
    we get what we go out looking for in life............

    ta
    rolf
     
  7. Ketsle

    Ketsle Well-Known Member

    Joined:
    3rd Sep, 2018
    Posts:
    205
    Location:
    Perth
    I agree that it does sound far fetched, however not completely unreasonable. Perhaps this was during the height of the furor of the RC.

    Is there anything you guys tell your clients to avoid?
     
  8. Terry_w

    Terry_w Broker, Lawyer, Tax advisor, Debt Recycle advisor Business Member

    Joined:
    18th Jun, 2015
    Posts:
    21,762
    Location:
    Australia wide
    Just avoid as much spending as you can in the lead up to a loan application. Any direct debit or credit card purchase could be questioned. They are looking for ongoing commitments not disclosed such as childcare expenses, etc
     
  9. opt

    opt Member

    Joined:
    11th Jul, 2018
    Posts:
    18
    Location:
    Victoria
    I had to provide bank and credit card stamens with my loan application (assuming that’s standard requirement these days??) which means the bank had access to pretty much every single transaction I did. If banks can load that data into a data analytics tool (which BTW is relatively easy to do, especially with structured printed documents like bank and credit card statements) then creating a an extremely detailed picture of your spending habits is a very simple thing to do. So it may not be as farfetched as you may think.
     
    Ketsle likes this.
  10. Terry_w

    Terry_w Broker, Lawyer, Tax advisor, Debt Recycle advisor Business Member

    Joined:
    18th Jun, 2015
    Posts:
    21,762
    Location:
    Australia wide
    But do they go that far? Not yet
     
  11. opt

    opt Member

    Joined:
    11th Jul, 2018
    Posts:
    18
    Location:
    Victoria
    Don’t know if they use it for loan approvals or not, but banks do have the technology to analyse your spending habits, and they are already doing that. For example, CBA app notifies me of how much I have spent on certain things (i.e: eating out, grocery etc..) as soon as I make a transaction. For example when I pay at a restaurant I get a notification saying "you have spent a total of xxx amount eating out this month". Which means they have classified merchants by catagory and tracking their customer transactions. (read more here) That’s a feature they openly offer to the public, who knows what sort of sophisticated systems they have for internal use.

    Its all done by software, the hard part is setting it all up. Once the infrastructure is in place no one has to do anything except feed in the data .. everything else is processed, analysed and presented by software.
     
    Last edited: 5th Feb, 2019
  12. Fargo

    Fargo Well-Known Member

    Joined:
    23rd Jun, 2015
    Posts:
    727
    Location:
    Vic
    Don't know if banks use it but don't know why they wouldn't unless some privacy law, but my accountant has been using it for years every thing can be categorized automaticaly. For finance I asked my accountant to shoot it over to my broker. Dont need to provide statements or anything.
     
  13. Brady

    Brady Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    1,590
    Location:
    Adelaide, SA
    Not yet, but wouldn't be surprised if it happens.

    Think it's a great idea that the OP has taken measure to make cuts to discretionary spending.

    IMO it's likely going to go down the path and those that aren't doing it now, might have to wait 3+months.
     
    Terry_w likes this.
  14. Harry30

    Harry30 Well-Known Member

    Joined:
    4th Aug, 2017
    Posts:
    726
    Location:
    Melbourne
    Doing an ‘audit’ on living expenses strikes me as a big administrative burden for the bank. How do you distinguish between once off expenses and ongoing expenses. Buying a brand new car last week is on the bank statement, but not something you do every week. So, each transaction needs to be scrutinised and categorised. Keep in mind they will use this to ultimately deny a person a loan, so the numbers need to be right. Once you move away from standard metrics to examining actual expenditures, surely the whole process is also open to more manipulation, as we all have the capacity to reduce expenditures for a temporary period. How far does the bank look back in time? Etc, etc.
     
  15. Ketsle

    Ketsle Well-Known Member

    Joined:
    3rd Sep, 2018
    Posts:
    205
    Location:
    Perth
    For the banks, it's not an onerous task at all. They are, after all, loaning you half a million dollars or more. They want to be certain theyre going to get their money back.

    I have a friend that worked in loan approvals, she said they have massive lists of checks and balances that need to be satisfied.