Is Buying Coffee Killing Your Mortgage?

Lending Rules for Current Homeowners

It’s currently a tough climate for first home buyers. House prices remain high, and banks analyse everything you spend thanks to the Credit Contracts and Consumer Finance Act (CCCFA). We’ve all heard the stories around people being rejected for a loan thanks to their daily takeaway coffee or their large spend up at Kmart. But what about those who are at the next stage? They’ve already bought the first home, and are looking to sell and upsize to something bigger and better?

For those that have owned a home for a few years, then chances are their equity has grown substantially in this time, thanks to the drastic rise in house prices. Thanks to this equity increase, they are now in a better financial position and have more to put towards the deposit on their next home.

So do all the changes to the CCCFA still apply to current homeowners? In short, yes. Those planning to buy their next home will still have to show the required documentation to the banks and prove that they are able to manage repayments – and especially if interest rates continue to rise. These buyers will also still have to have the minimum deposit required, which is usually 20%.

For those who are already homeowners, excessive spending habits will still be frowned upon by the banks, so it’s important to monitor and control spending in the lead up to a new pre-approval. Cut back on the shopping sprees, dinners out and holidays, and dump any subscriptions that aren’t being used. Banks love clean and clear bank accounts, so keep it simple.  Most importantly, talk to an adviser, who can give you advice around spending habits and help create a plan.

It’s important to keep in mind however, that while you may be able to get your spending right down, banks will still put in a minimum amount for some things like food, electricity, etc. So, while it’s good to cut back on some of the fancy extras, there may be little point in cutting right back as a minimum spend will be imposed anyway.

If you’d like advice around getting ready for your next home, then contact Jonty today.