FAQ | Loan Advisory Center

Frequently Asked Questions & Answers

Have a look at frequently asked questions & answers to understand more.

Why will one lender decline my loan and another approve it?

Each lender has their own criteria for assessing loan applications. Some people 's circumstances attract a wide range of lenders . For others there may be only one or two lenders that would consider their situation. An example of this is the self employed applicant who may need 2 years financials for one lender and 1 year financials for another.

Some lenders may require 5% genuine savings held over 6 months to borrow more than 85% of the value of the property to be purchased. Other lenders may not require any genuine savings and lend 90-95% of a property price. Each lender can be quite different in what it requires from the borrower. This is where the Loan Advisory Centre can help, sharing our knowledge and guiding our clients to direct their applications towards lenders that are best suited to that individual.

One Lender says I can borrow $200k but another says I can borrow $280k...

Each lender has different rules regarding the amount that individuals can borrow. Lenders examine your income sources, deciding on which ones are acceptable income. They allocate dollar values to your monthly cost of living and current liabilities and consider the amount you are applying for. They then add a margin to your expenditure to cover the anticipated loan repayments and if the loan is demonstrated as being affordable, then serviceability for that loan is approved.

Rules regarding borrowing power can be vastly different between lenders. One of the main areas where differences may be seen is in the area of acceptable income. An example of this is the Family Tax Benefit A&B. This may be accepted as genuine income with children aged up to 13 with one lender and children only aged up to 11 with another. Calculations regarding individual expenditure may also be subject to different formulas between lenders. Because there are so many components in determining serviceability, preliminary calculations at the Loan Advisory Centre are both specific and tailored to the individual, in order to avoid misleading and irrelevant informal quoting that results from generic calculators.

Does it matter if I make lots of applications to different lenders at once to increase my chances of approval?

Each application you make will create a credit enquiry on your personal credit history. Lenders look very carefully at credit histories when determining suitability and actually take into account the number of applications you have made. Too many applications can result in a decline of a loan based on an excessive active credit history. Some lenders even consider that 3-4 applications in a 3 month period is problematic. The loan Advisory Centre does not offer self managed online application forms for this reason and guides clients to carefully consider lender suitability and personal circumstances before seeking any approval, thus paving the way for the best match between borrower and lender to be achieved first time.

What is Mortgage Insurance and why do I have to have it?

Mortagage Insurance is an insurance that Banks take out against you failing to repay your loan. If the Bank has to sell your property and they do not recover enough to repay the loan and the selling costs, they can claim the shortfall against the insurance policy. A borrower with full income verification who wishes to borrow more than 80% will be presented with an insurance premium. A borrower with low documentation verification, as in self employed applicants, will face an insurance premium for wanting to borrow more than 60%. This insurance is expensive and designed to protect the lender, not the borrower. Premiums charged may vary according to the lenders past history of claims and insurer chosen but fortunately most lenders will capitalise the premium amount on to the loan amount.

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