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Equity doesn’t cut it like it used to

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NZ Adviser | 25 Jul 2016, 01:36 p.m. Agree 0
An Auckland mortgage adviser says more home owners are finding that the equity in their homes is ‘no longer a sure thing’ for bank approval
  • Glen | 25 Jul 2016, 02:07 p.m. Agree 0
    This is not a particularly new development. When working within the mortgage industry both as a broker, a Branch manager and a Mobile Mortgage Manager, numerous of times have I had to spell it out to applicants that equity does not pay the home loan nor put food on the table. I do not see this as a particular shift in bank thinking. I and my colleagues were applying this thinking 15-20 years ago. Often the people we had to educate were customers and mortgage brokers, many of whom have had little to no direct lending experience.
  • Tania | 25 Jul 2016, 02:24 p.m. Agree 0
    I have to agree with Glen above......for most of my banking career (now in excess of 27 years) the five "C" of lending have applied....the two upmost of these being "capacity" (ability to afford to repay) and "character" (customer's willingness/intent to repay) ranking ahead of "collateral" every time.....

    Responsible lending legislation may be a "new thing" to some lenders, but to those of us who have been "around the block" when it comes to the vagaries of the property market in particular, that has always been the backbone of any lending decision
  • Kiwi dreamer | 25 Jul 2016, 03:26 p.m. Agree 0
    My equity is apparently worthless. I have asked Westpac, ASB and BNZ for $450K in the last week, all of which have refused. I have been told I already need a 40% deposit for an investment property... so I will be looking at NON-bank options and also moving my current mortgages from Westpac!
  • Malcolm | 26 Jul 2016, 08:14 a.m. Agree 0
    It does seem quite a different market, we are heading to in the lending space. I get very concerned with mortgage brokers who apparently have strong relationships with certain Bank managers just to get more customers, and more deals over the line. It does seem very commission driven.
    Personally I think if you require some extra lending, I think the best option is the direct approach to your bank.
  • Glen | 26 Jul 2016, 08:19 a.m. Agree 0
    In response to Kiwi dreamer, have you stopped to consider the reasons why three major retail banks have refused you further lending? If it is due to the 40% requirement for the purchase of an investment property, then that is hardly the fault of those banks. The Reserve bank is introducing the requirement. Banks tend to move early on these things so as not to have a rush of pre-approvals and the funding requirements which go with it. If it is for other reasons such as the banks concern around debt servicing, perhaps you need to consider whether it is a good idea? Start from this position, banks want to lend money, after all, much of a banks business is made from this. Therefore, if a bank says no, instead of getting upset, people should sit back and look at the reasons why.
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