Banks and lending at the moment !

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Forums › Finance and wealth management › Banks and lending at the moment !

martyyn

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#303537 17-Feb-2023 02:02

We're looking at buying a property to run our two businesses from.

Even if you use the banks ridiculously low valuations of our properties our current lending is < 20%

The new property would take us to just under 60%.

Our income is more than it's ever been in our lives and way more than their calculators require.

We have only one dependant still at home.

No other lending, no outrageous CC limits and the cards are paid in full every month.

We've been with the same bank for nearly 20 years.

They've told us our application is "tight". Really ?

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Smpl Mnmlst
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#3037986 17-Feb-2023 04:06

Maybe you should approach another bank - you might find they will welcome you with open arms.

A couple of questions: Is the second property a commercial property? Are you offering mortgages over both your existing home and the new property?

Sometimes I just sit and think. Other times I just sit.

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martyyn

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#3037991 17-Feb-2023 06:32

We've already contacted another bank who've said they'd love to be involved so we're going through the paperwork with them this week.

It's not a commercial property and we fit below the requirements for resource consent thankfully and yes we're likely to have mortgages over both properties.

I've been into our bank multiple times over the last five years to discuss doing something like this and each time they've said "no problem".

Now we've done it they're telling me it will be a problem after all.

eracode

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#3037993 17-Feb-2023 06:49

Go and don’t look back.

Sometimes I just sit and think. Other times I just sit.

irpegg

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#3038000 17-Feb-2023 07:47

When it comes to customer loyalty it means nothing to a bank. Infact i think mentioning it is reductive, as the mortgage specialist is sick of hearing it.

Handsomedan

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#3038008 17-Feb-2023 08:50

As a banker (although not in the small business/personal/lending space), it simply amazes me that there are banks willing to see customers who are loyal, consistently show an ability to service and have enough equity leave them. And they don't bat an eyelid.

In my 25+ years in the industry, I have seen lending rules tighten and loosen, appetite grow and contract and property markets boom and bust, but I have never (until recently) seen banks have such a cavalier attitude toward their own customer bases.

This doesn't often happen in the Corporate and Institutional space where I play, but it's still there - certain industries we do want/don't want, certain companies we suddenly fall out of love with etc. Makes my job a lot harder than it needs to be.

I hope the new bank treats you well and your business flourishes.

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Eva888

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#3038030 17-Feb-2023 09:45

Brokers are great in these cases.

concordnz

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#3038036 17-Feb-2023 09:57

@martyyn,
Theres a few factors that come into play.
The most relivant ones being (your age, - you say most of your kids have left home, so I'm guessing you are middle aged)
1)Banks generally limit mortgage terms to your retirement age (65'ish) - As your earning/repayment capability drops significantly then.

So if you are 50yo some banks may only lend to you for a 15 year term, vrs the 25-30 year term you could get when you were younger. (or the 20 year term, when you talked to them 5 years ago....... That 5 year delay has shortened your term by 25%.....)

2) Banks are forced to calculate your 'repayment ability' on a far higher rate, than current mortgage rates.
When market mortgage rates were 2.4%-3.5% they were calculating your serviceability at 6.5%-7% to work out the maximum they were willing to lend to you.
(people who are now facing significantly higher fixed rate mortgage rollovers will now be pleased they did - even know they complained at the time about not being able to borrow more.....)
I'm not sure their current 'serviceing rates' they now work on - but it will be significantly higher than it was 2-3 years ago....

Credit cards have a significant impact.
For lending/serviceing, banks must work on the 'max limit available' of your C/C and apply its full interest % (which is normally 20%-25% - this take a 'huge chunk' out of your borrowing capability. - (paying your CCs off each month means very little, in their calculations).
It's smart to lower your CC 'limits' close to what you are actually using - to increase your borrowing ability from banks. (you can increase them again 3mo after loans sorted as weirdly, they use different calculations to define what limits you can have)

Lastly,
Use a mortgage broker, - they know which banks have got which(current) criteria, and know which banks will be most generous in lending to you - let them do all the hard yards and paperwork - they often have contacts high up in lending departments too.
(p. s. You don't pay mortgage brokers - the banks pay them a small trailing commission for bringing them business.

cokemaster

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#3038046 17-Feb-2023 10:27

It always amuses me and puzzles me with how the banks customer service alternates.
Sometimes banks will go out of their way to provide a solution and other times they act with a lot of indifference…

I’ve experienced it with many of the major banks eg. Westpac, ASB and Kiwibank.

As a result, I’ve become a bit of a banking nomad. I have accounts all over the place and if a bank is uncompetitive or provides customer service, I just drop them as one of my primary banking providers.

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Amosnz

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#3038048 17-Feb-2023 10:30

martyyn: We're looking at buying a property to run our two businesses from.

They've told us our application is "tight". Really ?

Sounds like TSB. If it is, we always have to deal with their 'Lending Centre of Excellence' (which is a massive oxymoron as the amount of hand holding required to get them to do simple things is ridiculous).

Speedtest

mattwnz

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#3038295 17-Feb-2023 17:49

What do you mean by ridiculous low valuation? Prices are dropping and they don't know by how much and so banks are probably being very cautious at the moment.. This article is also an interesting read https://www.afr.com/companies/financial-services/nearly-half-of-home-loans-at-risk-of-breaching-payment-buffers-20230217-p5cl9x

Wheelbarrow01

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#3038378 17-Feb-2023 22:59

And forget about bridging finance at the moment - we tried to get a bridging loan recently so we could buy our dream house. Current home is almost paid off (ie less than $80k to go) and I had enough cash in the bank to cover the deposit on the new home + the double mortgage payments for at least 6 months. My current bank strung me along for 10 days or so, then declined the bridging application a few days before the new house went to auction, leaving no time to try any other banks.

The reason behind the denial was that they saw huge risk in potentially having to sell our existing house in a hurry in a falling market. In the end their only advice was to hope the dream house got passed in at auction so I could make an offer subject to the sale of our existing house. It didn't, and we missed out.

Ironically this same house was for sale 3 years ago - at that stage, this same bank offered to lend me the full asking price secured against both houses ie they were going to lend me the full amount for the new house without having to sell the old one. Unfortunately we weren't the highest offer on that occasion, but this shows how much the bank's appetite for risk has changed in three short years....

MadEngineer

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#3038381 17-Feb-2023 23:18

Get a rental appraisal for your current home. Put that down as your income on the loan application. Worked for us.

You're not on Atlantis anymore, Duncan Idaho.

martyyn

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#3038384 17-Feb-2023 23:31

I'm on my phone so I'll try to answer a few questions.

Broker is now on the case with the remit to get the best deal regardless of provider.

We are 51 and having had interest bearing student loans we have always been very careful and very "trim" with our finances and lending. No excessive CC limits, no excessive spending, a modest revolving to use for treats which is always paid off first.

Our businesses are flourishing and this is the first time we've tried to extend our lending to expand.

Their valuations of our family home and rental property are significantly below what houses are selling for in our area. I'm talking 20% lower for our family home. We could get independent valuations but the broker has said to hold off for now.

We will be borrowing 100% of the purchase price but it still comes in at 60% of the property values. Surely they aren't expecting FHB to have a 40% deposit.

eracode

Smpl Mnmlst
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#3039976 21-Feb-2023 11:35

martyyn:

Their valuations of our family home and rental property are significantly below what houses are selling for in our area. I'm talking 20% lower for our family home. We could get independent valuations but the broker has said to hold off for now.

We will be borrowing 100% of the purchase price but it still comes in at 60% of the property values. Surely they aren't expecting FHB to have a 40% deposit.

This is getting confusing. So you have two existing properties and, according to your OP, “We're looking at buying a property to run our two businesses from.”

Does this mean you will end up with three properties?

Sometimes I just sit and think. Other times I just sit.

wellygary

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#3039977 21-Feb-2023 11:44

martyyn: I'm on my phone so I'll try to answer a few questions.

Broker is now on the case with the remit to get the best deal regardless of provider.

We are 51, We will be borrowing 100% of the purchase price but it still comes in at 60% of the property values. Surely they aren't expecting FHB to have a 40% deposit.

But you aren't FHBers...

You simply don't fit through the standard lending rules, because

a) You will be 65 before the mortgage term ends,

b) The mortgage will need to be encumbered across multiple properties,

and when you add on CCCFA, it is very easy for the Computer to say no...

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