Finding Finance - The Bank Manager's Secret Exposed.

The days when all lenders offered the same standard variable interest rate are gone.

Now, there are clear differences between products, policies and interest rates and that means choosing the wrong lender could cost you thousands of dollars over the term of the loan.

At today’s date, these are the standard variable rates offered by the big five banks.

You can see straight away why you should shop around. But there is more to choosing a loan than just the interest rate.

What they are not saying

Recently, lenders have been tinkering with their credit criteria. What was once ok, may not be any longer.

If your bank manager tells you that you can’t afford a loan, it may simply mean you don’t suit the bank’s new lending guidelines. And, you can bet your bottom dollar, she won’t tell you to head across the road to another lender whose guidelines might suit you.

By the way, in the time it’s taken her to tell you this, the finance clause on the purchase contract has probably expired, or you have been gazumped! You’ve lost the property you wanted

Matching a borrower to the right lender is vital to avoid delays and disappointment.

The Key Differences

1. The Assessment Rate: This is the interest rate at which a lender assesses your ability to repay a new loan. It is always 1 – 2 percent above the rate you will actually pay and every assessment rate is different. A good assessment rate can mean the difference between getting a loan over the line and failing.

2. Debt on Other Property: Some lenders will apply their assessment rate to debt on other properties you own. Others will accept the actual interest rate you are paying. This can be very important for property investors.

Say you have a loan on a five year fixed rate of 6,99%. Having a lender apply an assessment rate of 10.8% to the debt could dramatically reduce your borrowing capacity.

3. Rental Income: Lenders add a portion of the rent from your investment properties to your income to assess your ability to repay a new loan. The portion varies between 75% and 100%. Obviously, your position looks a lot better if the lender uses more of your rent.

4. Negative Gearing: When establishing how much you earn some lenders will take account of negative gearing benefits. Others won’t.

5. Low Doc Loans: Some lenders charge exactly the same for Low Doc Loans as they do for Full-Doc Loans. Others charge a higher rate.

6. Lender’s Mortgage Insurance: Most lenders will charge lender’s mortgage insurance if you borrow more than 80% of the value of a property on a Full Doc loan. However, it is possible to borrow up to 85% without paying LMI if you know where to look. There are lenders who will let you capitalise LMI over 80%. Others will only allow you to capitalise it to 80%.

7. Company/Trust Structures: Some lenders will provide loans to all company/trust structures. Others are selective.

	Lender A	Lender B	Lender C	Lender D
Assessment of New Loans	10.24%	9.61%	9.40%	10.82%
Assessment of Existing Loans	Your Actual Rate	Your Actual Rate	9.40%	10.82%
Rental Income Permitted	80%	75%	80%	75%
Negative Gearing	Allowed	Allowed	Not Allowed	Allowed
Company/Trust Structures	All	No	Some	All
Lenders Mortgage Insurance	Above 80%	Above 85%	Above 82%	Above 80%

These are just four lenders. There are many more to choose from. It is not possible for the average borrowers to know or understand the myriad rules imposed by lenders in the marketplace. And, as I said, your local bank manager won’t tell you.

To ensure you make a loan application to the right lender and obtain the right interest rate and conditions you need to talk to the right finance advisor. You will find one by calling Finding Finance 1300 729 075

The Bank Manager's Secret Exposed.

Looking for a Home Loan?

What they are not saying

The Key Differences