How Has Covid-19 Affected Banks Assessment Criteria?
As I write this blog, I hope we are at the tail end of our Coronavirus lockdown, and that the changes in lending assessment criteria will be a far distant memory, shortly. However, my job for my clients is to make sure that they are armed with the knowledge they need, to make informed decisions on how to obtain finance now amidst the pandemic. While many lenders have put in place a string of measures to make sure that they are not putting themselves or there would-be clients in loans, they would not be able to afford. For others, it is almost business as usual. In the spirit of having educated clients, I thought I would run through some of the current changes in assessment that have been brought about by the Covid-19 pandemic.
The first thing I would say is that mostly a common-sense approach has been adopted here. Jobs have been lost and income affected during this crisis. Bank clients have been given home-loan repayment reprieves for 6 months in order to make sure that clients do not go into hardship. This, in turn, would have an even more drastic effect on the economy. In turn, it is only logical that new lending is scrutinized under the new Coronavirus looking glass. The first new question that was added to the client interview is, have you, or do you see yourself being financially affected by the Covid-19 downturn? I know this is quite deep in terms of how long this is going to go for and how far the effects will reach ultimately. I suppose lenders are expecting you to look forward to the next six to twelve months and be able to confidently say that your income is not going to take a significant dive. If it is, unfortunately, lending will be a no for now.
There must have been a few clients and businesses that have tried to still get loans approved, knowing that they have been affected, as a few weeks after this, criteria was tightened again. In the past, lenders would take a payslip sometimes up to 60 days old. Now they would like one no older than your pay cycle. So if you are paid weekly, your payslip needs to be no older than a week at the time of application. Businesses about now would need their 2019 financials to submit a loan all the way up to next year, May. Now you need your 2019’s as well as bass statements until the end of April to prove the downturn has not hit your company. This may be a bit more hassle, but again I would say this is fair as you do want to make sure clients can afford their Home loans.
The added hassle can be mitigated by using a Mortgage broker to assist you with all the paperwork of applying. Castle Mortgages are Mortgage Brokers based in Adelaide, and we would love to help you navigate your way through the different banks and lending policies.
Things that I would say are not as fair, would be where lenders have wound back on certain types of employment and professions. Some lenders are not accepting casual income at all due to Covid-19. Many have also taken away the acceptance of commission, overtime, and bonuses, so if you have a job that is heavily reliant on these incomes, then those lenders are a no. A large swath of lenders are not taking incomes from industries that have been heavily hit by the Coronavirus such as hospitality, the arts, or retail. As you can imagine, there are many of us that are affected by this. Many lenders have also pulled back on there Lenders Mortgage Insurance Waiver policy for Dr’s and other professionals. To do that to a profession that is in demand at present shows us just how uncertain a time we are in at the moment.
I have just touched today on the raft of changes out there, and this is ever-shifting at the moment.
Now more than ever, I would advocate using a mortgage broker, as we have access to many lenders, and it is our job to be across all the changes. Instead of you going from lender to lender to find out where your loan is going to fit, why not use an industry expert to do it for you and increase your chances of having success? Castle Mortgages are Mortgage brokers serving Adelaide and the surrounding area.We love a challenge, and we love to assist our clients. Call us for a free,no-obligation chat today.
Please note this is a personal blog, this list of lenders and changes is not extensive and does not cover all lenders. This blog is general in nature and should not be taken as advice. Everyone’s circumstances are different, and if you would like to discuss your specific scenario, we would love to chat. Castle Mortgages are mortgage brokers based in Adelaide who pride themselves at being experts in finance structuring. Get in touch with us today.