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Is it still possible to borrow money in 2024?
borrow money

In recent times, borrowing money has become increasingly challenging, posing significant hurdles for individuals and businesses alike.

In the dynamic landscape of Australia’s property market, aspiring homeowners face mounting challenges when seeking to secure financing for their property purchases. 

The current economic climate, characterized by a confluence of factors, has significantly tightened the borrowing environment, making it increasingly difficult to obtain loans for property acquisition.

One prominent reason contributing to this difficulty is the evolving macroeconomic conditions, including tightening monetary policy and surging inflation, which has prompted lenders to exercise greater caution. Additionally, the reduced tolerance for risk among central banks, coupled with decreased liquidity in secondary loan markets, has further compounded the challenge.

Furthermore, the imbalance between supply and demand in the real estate sector, alongside soaring house prices, has exacerbated affordability concerns, making it harder for prospective buyers, particularly millennials, to enter the housing market. 

Proactive Strategies Required If You Want To Borrow Money


Amidst these challenges, it becomes imperative for individuals aspiring to own property to explore proactive strategies and alternative avenues to navigate the borrowing constraints effectively. 

We sat down with Michael Letts from SmartMove for a Q&A and to bring you some insights into actionable steps that potential buyers can take to overcome these hurdles and realize their homeownership aspirations: 

What are the main issues borrowers are currently facing with servicing loans?

The majority of lenders stress test new and existing loans at 3% above the actual interest rate and this is reducing borrowing capacity. In some cases, this is reduced to 1% – 2% depending on the scenario (i.e. if it’s a simple refinance with no additional funding and good conduct on the loans / credit score etc. Then the lender will stress test at 1% rather than the 3%). Provided the overall loan repayment is cheaper than the customer/s are paying it can allow them to refinance. We are seeing a number of these applications (but not all lenders adopt this approach, so you need to know which lender suits your situation). The other part of the market where we can access better borrowing capacity is with the non-banks who are being more flexible around the “buffering” or assessment rates on existing and new borrowings which turns up the dial on borrowing capacity for some clients significantly.

What are some of the ways a borrower can improve their serviceability with a lender?

If a customer has had an existing loan for several years (i.e. 5 years) and they are looking to borrow some additional funds, you could refinance the current debt and push the loan term back out. This improves borrowing power as the minimum repayment is adjusted based on the new loan term.

NB – one needs to be mindful that by doing this, if they are only making the minimum repayments, customer will pay more interest over the life of the loan. To mitigate this, we can calculate the true loan term being less and let the customer know and then if they want to continue paying the loan off within the same time period, they can make the additional repayments above the minimum.

Another option is if customer/s have a current credit card at a $10K limit for example.  Reducing or even closing the credit card will also improve borrowing power (the same concept applies to car loans, personal loans etc).

Why use SmartMove to do this and not go directly to your bank

Using a broker allows us to look at multiple lending options. Last year we used over 40 banks or funders to provide solutions for our clients. Each lender has a different credit policy so if you approach only one lender directly, you only have one option available. 

Good brokers get access to key decision makers to get the right outcome on applications and special access to pricing and valuation outcomes as well.

What are some hints and tips you could share with Adviseable subscribers?

Every 6-12 months check your current interest rate, chat to your broker to see if you have the most competitive rate in the market. Over the past month we have been saving our clients on average 0.55% on their rate by requesting a discount in line with the market. This has saved our clients thousands each week in repayments.  


If you are looking to borrow any funds (either for renovation / or another property purchase), check your available equity with a bank valuation via your broker / lender and if there is any available equity then you can use this towards your next purchase (provided your borrowing capacity allows this). In some cases, if you were to purchase another investment property, you can access the available equity (for the 20% deposit + costs) and set it up with Interest Only repayments with your current lender – see this as step one. Then as the second step secure a Pre-Approval with P&I repayments with another lender for the 80% part of the purchase. By doing it in this order, the new lender can assess your actual existing (Interest Only) loan repayments only and this will actually boost borrowing power. See the example below. NB – not all lenders will assess current debt like this. 

In summary you have two loans with two different lenders to secure the new investment property.

Can you give us an example or case study?

So let’s say Borrower A (we’ll call her Kate for now) has a current investment property and has available equity in her property for $100K. We accessed the available equity with the current lender (for improvements to her current property and for future investment purposes). We set it up as Interest Only repayments.

After this equity loan was funded (step 1 above), we then secured a Pre-Approval with an alternative lender for an 80% loan to purchase an investment property up to $500K (step 2 above).

Kate will use the available equity we secured ($100K) + some available cash ($30K) to complete the investment purchase up to $500K. By setting the 1st loan up as Interest Only repayments with the current lender, this has improved her borrowing power to secure the second loan. If we had set the Pre-Approval up with the same lender aswell, all Kate’s loans would be assessed at P&I repayments over the remaining loan term at the assessment rate of 9.5% which wouldn’t allow Kate to secure financing for a new purchase. 

What can you advise investors with more than one property who’d like to build  a portfolio? Is refinancing possible or impossible at the moment?

It always all comes down to personal circumstances … but as a general rule we are able to assess and review a borrower’s current loan structure, then scan the market as independent brokers and ensure all options are made available to the customer. We make sure that they are educated on what levers can be pulled to get the best possible outcome. As outlined above, if borrowing capacity is stretched then the tips above can assist (as long as it is affordable for the customer as this is of paramount importance).

As discussed, if some of the loan/s can be set up as Interest Only (with current lender) then by looking at alternative lenders who consider actual repayments when assessing current commitments this can boost borrowing power. Refinancing the current loan/s in place by pushing the loan term back to, say, 30 years will boost borrowing power in most cases.

Consider reducing / closing any personal loans / credit card limits etc.

Smartmove is one of Australia’s leading & most award-winning mortgage brokers,  specialising in residential home loans & investment loans. Their team brings decades worth of collective experience to help clients with their loan requirements. Over the past decade they have grown to be one of Australia’s largest mortgage broker groups. They understand that everyone’s situation is different, so they work with each client to find the right home loan & investment loan every time.

Whether you’re looking for a home loan, developing a property portfolio, or refinancing to make the most of your success, their expert team will guide you through the options.

Contact 

Email Michael michael@smartmove.com.au

Call Michael +61 0404 242 463

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