Will coronavirus stop me from getting a loan?
“I’ve read that the banks have stopped lending to people who work in industries that have been hardest hit by coronavirus. I work in retail. We’re lucky that we’re doing pretty well at the moment, but I’m worried that lenders will hold it against me. I’ll be gutted if that’s the only thing that holds me back from getting a loan.” - Nate, St Clair Hi Nate, There’s a lot of that talk around at the moment. In the past week, I’ve read that some banks are digging deeper to make sure loan applicants have secure jobs, or that they’re stopping lending altogether to people who work in industries that have been hit hardest by COVID-19, like hospitality and tourism. First, I’d say not to be put off by this talk. Yes, the banks are putting measures in place to reduce their risks, but I’ve not heard of anyone being refused a loan if they fit the lending criteria. You may have to jump through a few more hoops, but if you have a secure income, a good track record of saving, are living within your means and can demonstrate an ability to service a home loan, you’re in good shape. We’ll help you through any extra processes put in place as a result of the pandemic. The banks probably know better than anyone which industries and businesses have been hit hardest by COVID-19, given they have direct access to their financial data. If your business is strong and you can demonstrate its viability to your lender of choice, I’m sure we’ll be able to help you make it work. Of course, the value of what you’re buying is a big factor in this. The Loan to Value Ratio (LVR) should be strong if you’re looking to buy a house and land package; the relative cost compared to buying an existing property in Sydney at the moment is lower, which means less risk for the lender. In all of this, there are two very important factors to consider – choice, and the impact of your own personal circumstances on lending decision. Choice: As a broker, I can help you access more than 25 separate lenders, each with different COVID-19 policies and lending appetites. We can help you navigate around the lenders that are too conservative and not wanting to lend to clients working in particular industries. Rather than you making an arbitrary choice on who to apply to – which will possibly lead to a knockback, harming your chances on future applications – we can help you choose the lender with the highest probability of success. Personal circumstances: I heard of a situation recently where, days before they were due to settle on their land purchase, both the husband and wife were stood down from their jobs due to COVID-19. The bank reviewed their case and determined they were clients of good character, in industries with a high probability of recovery. The bank subsequently settled on the land, agreed to proceed with construction and deferred all payments for six months. Keep in mind that now more than ever, banks are looking for good customers to lend money to. Australian banks rely heavily on home mortgages, and need to keep that business coming in. As a next step, let’s make a time to talk through what you’re hoping to buy and review your situation, to figure out the best next steps to applying for finance. When’s a good time for you? Best, Ray Treacy, Mint Loans