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Bryce Holdaway Blog post by Bryce Holdaway

5 Golden Tips for getting Finance in this Changing Landscape

Today I want to talk to you about some tips on getting finance in the current environment because we know that the landscape has changed with APRA intervening 12 – 18 months ago to try and take some heat out of the property market.

But it’s still a very good time to be playing the long game and buying really great properties in the marketplace… but the biggest challenge people have is around lending.

So I want to talk about a few elephants in the room.

The first one is… finance structure actually matters.

If you’re going to buy just one property, sure – just get a loan, make a transaction, and move on— but I’ve been doing this for twenty years, and I haven’t seen too many people retire on a passive income with one investment property. Generally, they need three or four — in some cases a couple more. So if you want to play the multiple property game, you’re going to have to get multiple loans. For me, it’s important to get the foundations right now. That might even mean taking one step back to go two steps forward.

So my advice here is, do not be in a hurry.

I know that people, once they decide they want to buy, want to get into the marketplace as quick as they can. But in some cases, the re-engineering and the restructuring of the portfolio means that it may take a little bit more time to get that finance in place. So my advice at this point, is just be patient. Because if you get this right now, what it means is that when opportunity strikes, you can actually pounce on it.

Because you’ll have your equity released, you’ll have all of your loans stand-alone — they’re not cross-securitised — and it also means that you’ll have deposits and costs ready to go for the second property and the third property and so on.

So my tip here is finance structure really matters — and to take some time now to get that foundation right.

 

The second thing I want you to think about is… be a good money citizen.

By that I mean, if you’re overdue paying your bills, or you’re late in making your loan payments, or you discover that your limit on your credit card — even if it’s over by a hundred bucks — it actually matters! Because you need to respect the rules. In isolation, it doesn’t matter — you go over by a hundred bucks, and you get a little notification — but in the age of big data these banks can scrape all of this information and determine your character when it comes to whether or not you’re a good risk for a loan.

To get financed in the current environment, make sure you’re a good money citizen — pay things on time, get auto-sweep on your credit card, make sure you’ve got a squeaky record, so that when the bank has a look… they’re quite happy with who you are as a risk to them.

 

My next tip is to play the team game.

By that I mean, if you’re engaging with a finance professional, whether it’s the bank or a mortgage broker — I’m clearly suggesting that you should use an investment savvy mortgage broker; it’s certainly my preference — but if you’re engaging with any finance professional, keep them in the loop. There should be no surprises whatsoever. By that I mean, if you’re in the middle of an application process, and then you go over to another bank apply for a credit card, and then you make an inquiry at a different bank for another credit card … this MATTERS — it actually comes up on your record. What it does is; it puts doubt in the mind of the bank that’s assessing your current application.

So it’s important you know that this is important stuff when you go through the application process. It’s almost like you have to quarantine what you’re doing — liaise with your professional, and then don’t let them have any surprises. Surprises like, “It’s Monday morning, I bought a property on Saturday, and I’ve got to settle in 30 days!” You should have this conversation prior or, equally, putting it on your finance professional’s desk on the Monday, and saying, “I need you to get me approved to go to auction this weekend.”

What you may find, is you might get the quickest option; but it might not be the best option.

Because you’ve really defined those timeframes, and made them really small, and you might be putting your finest professional into a corner. So, play the team game — don’t let there be any surprises, and let your finance profession know, as early as you practically can, when you’re interested in a property.

 

My next tip is… boring is fine when it comes to lending money.

By that I mean, if you have a boring application; that’s great. You’ve lived in the same house for a long time; you’re in a stable relationship; you haven’t changed jobs for 20 years — as far as the bank concerned, this is a big tick. Versus moving house a lot; you’re in between careers, or you’re changing jobs — even in some cases, having relationship changes — these leave the question in the bank’s minds: how do these changes affect the ability for this person or this couple, or whatever the borrowing structure looks like … how does this change affect their ability to repay the loan?

That’s always the question. Therefore, my tip is in this environment — boring is absolutely ideal. If you were stable in those same things, ongoing; that’s a good thing when it comes to finance.

 

The last thing for me is what I call, “Herding the cats”.

When we put an application to the bank, what a lot of people don’t know is that the initial application is being checked off by the system. It has to go through all these gates, all this criteria, before it actually goes to a human being. Therefore, when we put this application up to the bank, we need to know that the quality of our application is strong in order to get through that initial gate — so we can ultimately get to the human who will sign off on it. So, if we reverse engineer that — again, the information you provide to your finance professional is really important; so don’t give it to them in dribs and drabs if they requested all of these items you need to provide. Make sure you give it to them in one big batch so that they can put a quality application together, present that to the bank and give you a better chance of getting your application over the line.

I’d certainly acknowledge that the landscape has well and truly changed. You need to give yourself the best chance possible at getting your loan approved in this current environment. Because, for me, the opportunities in the next 12 – 18 months to buy really great properties haven’t been this good for a long time! But you need to make sure you can get the finance. So, have a look at those tips, see if you can implement them, and I’ll see if they’ll make a difference the next time you submit a loan to the bank.

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