While your house may be worth a fortune, it’s now harder than ever to convert property assets into cash because New Zealand’s major banks are assessing mortgage and loan applications against income over equity.
Director at Auckland mortgage brokers LoanPlan, Christine Lockie, says that the banks have been steadily tightening their lending criteria, possibly to pre-empt any moves by the New Zealand Reserve Bank to further regulate how the banks lend money.
“The banks clearly don’t want to be told they have to assess mortgage applications against income ratios to the extent that they’re controlling lending themselves. My experience now is that regardless of how asset rich you are, if you’re income falls short you’re not going to get the loan through the banks
“What this means is that single people on a single income are highly unlikely to get a mortgage to purchase property in Auckland unless they have a really good deposit. It takes two good incomes to get a mortgage at the levels young couples need.”
Ms Lockie says couples with two good, fulltime incomes may still have to prove that they are financially disciplined in their spending.
“This simply means that people who are on low incomes can forget about getting a mortgage in the current climate, while those who are earning higher salaries can generally borrow more – it is certainly indicative, right there, of the widening gap between the ‘have’s’ and the ‘have nots’.
“My advice though, is not to give up. Get expert advice, shop around and avoid switching jobs unless changing employment means a noticeable salary increase. Moving jobs, moving addresses – even rentals – maxed out credit cards and late payments on your bills will not help your cause.
“Keep your job, eliminate debt, put your efforts into building up your savings, even with part-time work, and pay your bills on time to maintain a good credit record. Just one of these factors could be the difference between an approved or declined mortgage,” Ms Lockie says.