Why its Important to love your bank account when it comes to getting a home loan!
Does your bank account occasionally slip into overdraft, or do you incur dishonour fees on your account?
If the answer is ‘YES’ then this might be bad news for you when it comes to applying for your home loan.
First Home buyers often have less than 20% deposit. Loans with less than 20% are referred to as High LVR (loan to value ratio) loans. Loans which are high LVR are subject to more rigid lending criteria than other loans as they pose a higher risk to the bank or lender. For this reason banks pay very close attention as to how well you manage your bank account. Frequent unauthorised overdrafts and or dishonor fees can indicate to a bank that either you do not manage your finances well or perhaps that you are not living within your income. This is not good news if you’re hoping to get that ‘approved’ stamp on your home loan application.
We understand how easy it it can be to overlook an automatic payment or direct debit which can cause you to end up in overdraft – so we recommend to ensure you don’t slip into overdraft and incur those pesky dishonor fees, that you either have a float in your account or alternatively arrange a small overdraft facility on your account. Yes there will be a fee, but it will cost you less in interest (as interest on an unauthorised overdrafts is expensive as the interest rate is higher, than the interest rate for an arranged overdraft) not to mention the cost of dishonor fees!
Note : Whilst account conduct is something that is considered for all home loans, it is of even greater importance if you are applying for a high LVR loan.
August 27, 2014 Blog