Bank's Criteria is not always Created Equal

21 June 2016
You may think that all banks will look at home loan applications the same way, and the only difference between lenders comes down to interest rate pricing and the experience in the branch, but you’d be wrong. Various lending institutions will apply quite different criteria when assessing your application and it can have quite an impact on the cost of getting a home loan.
When putting a loan application together, it is not just a matter of your adviser finding the cheapest price. It may be that certain aspects of your purchase will lead to one bank being a better option than another. Sometimes these variations in criteria may relate to the property itself, but often it can be the lenders policy that stands in the way of you getting an approval without difficulty or additional expense. We usually think that the bank we have a relationship with will provide a home loan and will want to look after us as a thank-you for our years of custom. While this is often the case, the reality is that your application needs to fit within their policy guidelines in order for you to get an approval.
So, what sort of differences are we talking about? With some banks there may be a requirement for the property being purchased to be of a certain type or value. We have seen situations where despite everything else ticking all the boxes regarding affordability and suitability, a bank has refused to offer a loan approval due to location or price of the house. There can also be differences with lenders appetites for deposit requirements for different types of application. Banks will require a certain level of equity to be held against their loans, but it will vary from lender to lender, as to what type of deposit is required for each situation and can even be due to the location of the borrower as much as the property. Recent changes in many banks policies have seen a requirement for larger deposits for those buying in New Zealand who are living and working overseas. Not all lenders have applied the same rules however, and even those who have, differ in the amount of time until they will enforce the new ruling. 
Another situation we have seen recently relates to one particular bank who require Registered Valuations any time the purchase price of a home is 10% or more above the electronic or Rateable value. With the current buoyant market and the age of the valuations on file, this scenario is happening more and more often. In some cases houses are even selling above the vendor’s asking price due to the number of buyers relative to the number of well-presented houses for sale. I recently had a discussion with one of the bank’s regional managers to query the bank’s decision to hold firm on their policy even though it means that an existing customer of that bank will take their business to a new lender that has also approved their loan, as they won’t have the extra cost of a Registered Valuation. He agreed that it was short-sighted but the bank won’t waive the policy for any reason.
So, as you can see from the examples above, the lenders criteria can have a significant bearing on your chances of getting a loan. Your own bank may turn you down when others may not, or provide you with a finance offer with more conditions, meaning extra expense and time being wasted ahead of getting an approval. Speaking to an adviser who has access to a wide range of lenders will enable you to explore all your options, and end up with the best home loan to suit your needs.

Published In Whakatane Beacon

This post was written by

John White - who has written 90 posts

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