It’s not you, it’s them – but they think it’s you: Dealing with banks post GFC

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If you more familiar with KFC than the GFC: read on for how the GFC is impacting you now and you probably don’t realize it!  
 
“Global Finance Crisis” this crisis of credit means lenders are having trouble getting enough money to lend out to the all people who want it.
 
Borrowing money in years gone by this was an easy thing: there was a lot of money sloshing around the world looking for a home.  Post GFC the supply of money has dried up. For about 3 months during the GFC is was literally gone. 
 
So how does this impact you?  Lenders are now starting to be very, VERY picky who they lend this limited amount of money out to.  Why should they lend to anyone who might be risky, when there are so many non-risky people wanting this money as well?  
 
Yes its unfair, but it is also our new normal.  Get used to it and play by their rules and you will get approved.
 
So the first thing they look at is your credit history.  If you have any defaults at all no matter how small- this can mean an automatic decline.  No questions asked. No arguing.  Check your credit history:  go to www.mycreditfile.com.au  it’s free.
 
How do you conduct your account and credit cards?  If they see any overdrawn, late, dishonor or over limit fees, they will probably say no too.  If you have a habit of going over your limit, then close that card or account, start a new one at a new bank and never ever go over your limit again.   
 
Take out your last 3 months statements for all accounts and credit cards, and go over them line by line: you may as well do this because this is what the bank will do.  Now is a great time to put yourself in the banks shoes, and ask would you lend to you after looking at those transactions?   Being loyal to your bank, can work against you too, as they can pull up your account history going back years and you can’t hide those transactions from them. Sometimes it’s better to start afresh at a new bank, provided you don’t go back to your bad behavior
 
If you have more than 2 credit cards especially if they are maxed out, this is not looked upon favorably either. Banks believe no one needs more than 1 or 2 credit cards at most (one for work and one for personal is acceptable). Cancel the rest and drop those limits to the bare minimum. After all, with few exceptions, no one really needs more than $5000 in credit card limits.
 
5% genuine savings is required plus upfront costs like stamp duty used to to be the minimum amount the bank will accept.  Now some require 10% or 15% plus the upfront costs.
 
If you have changed jobs recently it is very difficult to get a loan approved.  You will need to be off probation at your new job.  Also if you have moved from being PAYG to contractor this too has implications. 
 
There are other ways of reducing demand for property loans, which have nothing to do with you, but with the property you are buying.  For instance banks have all kinds of restrictions on certain postcodes, for buildings with more than 35 units, for apartment buildings over 4 stories, for certain developers, and so on.   A good mortgage broker will help you through this minefield.
 
If you want to borrow money in the near future, a bit or preparation now can be the difference between a “yes” and a “talk to the hand” from your bank.

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Catherine Lezer

Property is Catherine Lezer’s passion. She owns nine properties of her own and has a fundamental understanding of how the property market works. 

“I’ve bought some great properties and some ‘bad’ properties, and even the bad ones have made me money,” says Catherine. “Property is the most reliable way to make money that I know!”
 
“I’ve purchased, sold, tendered, offered, negotiated, won and lost at auction, developed and renovated so I understand what happens out there in the market,” she adds. “Being able to help other people finance property is an added bonus for me.”
 
Originally from Perth and now based in Sydney, Catherine joined Smartline in 1999 with over 25 years of banking experience and qualifications include a Bachelor of Business and an MBA. Catherine has helped hundreds of clients finance houses, semis, terraces and apartments, with the majority of her business coming from word of mouth referrals.
 

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