In 2021, new lending restrictions came into effect under the Credit Contracts and Consumer Finance Act (CCCFA) – and immediately there were stories of people being declined loans for what seemed like trivial reasons.
In March, the Commerce Minister announced changes designed to free up the process of loan applications at the banks. This should reduce some of the paperwork hurdles for those seeking home loans, but it’s still going to be tougher than ever to get your mortgage approved in 2022.
Here are three tips for getting a home loan approved under the new CCCFA regulations.
1.Talk to an advisor
There are some big upsides to using a mortgage advisor. They speak to all the banks, not just one, and they can shop your application around and get you the best deal. Their service is free, and their expertise can set you up for success. Try to find a broker you like well before you plan to apply, so they can provide you personalised advice on what changes you can make to help your loan be approved.
2. Go on a spending diet for three months before you apply
The bank wants 90 days’ of transactions, so during that time you want to be saving as much as possible to demonstrate your ability to repay your debt. Before that period starts, cancel any subscriptions you don’t need and make any big one-off purchases that need to be made. Then you’re as well-prepared as you can be for your three-month spending diet.
3. Set aside plenty of time for your application
Even with the new changes in place, banks will still ask you a lot of questions and want masses of information. This might include financial statements for your business as well as bank statements and other details.
It can take longer to pull these together, and the bank is taking longer to assess loans and provide feedback. Apply early! And let us know you’re applying, too, so we can get your business’s financial statements through and answer any questions the bank might have.
Don’t be discouraged
The good news is that the majority of loans that would have been approved before the CCCFA came into effect will still be approved now. Being self-employed can make it harder, but we can help you present your business accounts so the bank can see how well you’re doing. Sometimes they will want a forecast for the next 12 months which we can help with.