I got pre approved for a $420,000 home loan 6 months ago and now the bank say I can only borrow $390,000. If my situation is the same how can the bank change their mind like this?
Thanks for your question. Generally speaking you will find that most pre-approvals will only last for 90 days and after this they need to be re-assessed against the lenders criteria. In recent months I have seen a number of lenders increasing their minimum costs associated with living increase which has negatively impacted on affordability but it does also provide the consumer with a bit more protection from increased costs of living.
I am happy to look over your financial information if you would like to be able to have a second opinion on your maximum affordability as each lender can be quite different.
This is why you need to use a mortgage broker. Lenders are constantly changing their policies and assessment criteria. The only way to stay up to date is by using an experienced broker and have them assess where best your loan fits. Happy to discuss further. Regards
Great question Jackson as both Kathleen & Robert suggested the market & lenders & banks attitude towards lending has changed a lot in the last six months so it's not unheard of that a pre approval from 6 months ago is now reduced. Has your broker offers any suggestions on how to improve the servicing to get back up towards the original amount. Suck as reducing credit card limits or closing facilities that just are not being utilised.
Is this an investment or an owner occupied property? Are you planning on paying principal & interest as opposed to interest only.
Hope the able helps & happy to discuss offline further.
Rebecca A Mitchell
Hello Jack, most banks have recently moved to Henderson method of living expense calculation which increases your minimum living expenses if your household income is high. So it is good time to speak to your broker to see which bank will lend you the mosy. Regards Harish
Jackson. Hi. The reason for your lender now offering a reduced borrowing amount could be due to many factors, however the reason will fall into one of two criteria.
Firstly The security offered. It is possible that the valuation on the property has fallen short of the purchase price and the loan request is now outside the maximum lending criteria. Alternatively the property may be subject to lending restrictions in regard to size, location etc that would not have been known at time of pre-approval.
The second probable cause is your capacity to repay. Not all lenders offer a "fully assessed" pre approval process. Your original application may not have been fully assessed in regards to source of income, use of overtime / bonuses etc. Ln addition to this the lender may have increased the required buffer necessary to cover living expenses, other continuing commitments etc.
if the property is to be used as an investment, it is also possible that changes have occurred in regard to the allowance of rental income, usage of Negative Gearing allowances etc.
I recommend you check with a Broker who has a good range of Lenders to calculate your borrowing capacity across a broader rang of lenders than the one you are currently dealing with.
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Customers First Mortgages & Insurance
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So sorry to hear of your predicament. It's not uncommon unfortunately. They will want you to resubmit an application with a 6 month pre-approval anyway. If you need more than they are offering you are better off lodging a new application with a lender who will. We'll be happy to help. Regards, Bulelwa
Six months is a long time to have a pre-approval as so many things can change during that period especially where banks are concerned...however every lender is different and I would be happy to assess you to see if we can re-approve you at the higher amount 😄