TOP 5 REASONS YOU WON’T GET A HOME LOAN
Leading direct lender reveals why would-be borrowers are rejected
EMARGOED MEDIA RELEASE
THURSDAY 08 JULY 2010
The criteria lenders use to approve home loan applications remain tight, shattering the dream of home
ownership for many Australians. Leading direct lender MyRate.com.au shares their research so that those
considering a home loan have a better chance of getting ahead of the game.
The turmoil brought about by the Global Financial Crisis saw all lenders lower their tolerance for risk, which
resulted in a much tougher qualifying criteria for borrowers throughout 2009. This has not eased in 2010.
MyRate.com.au’s recent study reveals that there is little or no change in this strict lending criteria and exposes
the current top 5 reasons would-be borrowers applications are being declined.
MyRate.com.au Managing Director Kevin Sherman explains. “Lending criteria are quite strict in the current
climate because of the GFC, as well as uncertainty around property prices and unemployment rates. As such, it
is now a lot tougher to qualify for a home loan. However, potential borrowers can certainly benefit from
understanding how these will affect their chances of securing a home loan”.
Top 5 reasons borrowers are rejected based on MyRate.com.au’s analysis :
1. The borrower cannot demonstrate savings history
Being able to demonstrate a track record of savings could make all the difference in securing a home loan.
Lenders check bank accounts and other records for evidence of borrowers putting money aside as this validates
a borrower’s ability to make repayments. “I’d go as far as to say it’s impossible to get an affordable loan without
at least a 5 per cent deposit” says Sherman. “However saving 10 per cent of the value of a home goes a long
way to demonstrate what you’re financially capable”.
2. Loan Serviceability - for example; the borrowers income does not seem secure
Continuity of employment and how long you’ve been with your current employer is taken into account when
assessing security of income and loan serviceability. This is an issue for individuals that have taken time out of
the workforce to raise children or for those that have started a new job. The fact that many employers have
extended probationary work periods from three months to six months has exacerbated the issue, resulting in
borrowers having to wait longer to obtain a loan. “A strong application will often show individuals to have
worked for their current employer for at least two years or more”.
3. The borrower has credit rating issues
Lenders like to see a clean credit record and evidence of maintaining payments to previous lenders, landlords
and/or service providers. Often borrowers submit applications with many lenders in hope that one will say yes.
However, this can cause havoc by reducing your credit worthiness. “Something as simple as an unpaid Telco bill
due to dispute or shopping around for finance, which shows excess activity on your credit file, can be viewed as
a negative by lenders. Basically, anything that may raise suspicion will be closely scrutinised and assessed for
risk“ explains Sherman.
4. The borrower cannot supply enough funds
Lenders need to be satisfied that in a worst-case scenario, they can sell your property for a sufficient amount to
recover the cost of the loan. In the current climate, most credible lenders require borrowers to make a
minimum contribution of 10% when purchasing a new property or 15% when refinancing. “Deflating property
prices and a softer estimate for future growth means that lenders remain tight on their principles to reduce risk”
explains Sherman.
5. Not enough equity to refinance
In cases of refinancing, applications are being declined due to the lack of equity in the existing property. This
could be the result of a property being undervalued or an outcome of changed real estate conditions.
“Insufficient equity is a likely result if someone purchased a property at a time when home sales and prices were
up with only a small deposit made on the mortgage and prices have since plateaued or declined”.
Banks and lenders are undoubtedly more cautious than before, with most looking for a better quality borrower.
“The bottom line is that anyone currently looking for a home loan needs to present themselves as a reliable,
secure bet for those handing out the money. The best thing you can do for yourself is to be organised and over-
prepared – you’ll come across as a great candidate if you can demonstrate your ability to repay to the best of
your ability” concludes Sherman.
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INTERVIEWS
Contact: Natalie Ball (02) 9240 8132
ABOUT MYRATE.COM.AU
MyRate.com.au is Australia’s leading direct home loan lender, funded by ING Bank (Australia) Limited. MyRate's fully featured standard
variable rate home loan rate is now 6.63%p.a. (or 6.59% pa for loans above $600k) with no fees on standard applications - one of the
lowest in the country. MyRate also boasts a fast turnaround with a 5 day formal approval guarantee.
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