The mortgage landscape has undergone a dramatic shift in the past year as a property market downturn emerges in the big cities and the banks clamp down on lending.
The changes are having a clear impact on would-be borrowers.
On average, around 50 per cent of credit applications are now getting knocked back, according to buyer’s agent Veronica Morgan of Good Deeds Property Buyers.
She says Australians need to be savvier with their personal finances in order to succeed in today’s property market.
“The pendulum’s gone from one extreme, where it’s far too easy to get credit, right to the other end where it’s been a bit ridiculous,” Morgan told Your Money Live.
To maximise your borrowing power and get the loan you want, Morgan says there are a few tricks you should be aware of:
- Cut down on extra spending. Demonstrate at least three to six months of good spending habits with your bank of choice before you apply for a home loan.
- Reduce your credit card limits. Card limits are seen as debt by lenders, regardless of whether it’s being taken advantage of. So if you have $10,000 of unused credit, it’s time to get rid of it.
- Reduce other debt first. Whether it’s credit card debt or a car loan, every bit of extra debt counts against you when applying for a mortgage.
- Choose wisely. As the downturn continues, less than 10 per cent of properties will deliver good capital growth moving forward. Get advice before you make a decision.
For more useful tips, watch the video above.