Mortgage Advisors are invaluable in terms of presenting your financial position to the bank in the best possible light.
Say you go to the bank direct and you let them know the reason you want funds for. The banker will nod and give you a shopping list of documents to collate to send to them. They will in turn submit this to their internal credit team, who essentially have the power of approving or declining a loan without meeting you. This is a huge risk, as how do you know the lender has presented the application in the best possible light? How do you know if they have done everything they can to mitigate weaknesses in the application? Often you only have one shot to get it right with banks credit team before your file becomes “tainted”. Getting credit to re-consider a loan application can be tricky.
Now this is why a mortgage advisor is invaluable. They will take time to understand your personal position. They will provide commentary on the application, which can sway an application from declined to approved. By going direct you don’t have the chance to give the bank commentary.
Please see examples on when strong commentary is helpful below:
Short Term Contracts
Wellington in particular is full with contract workers. Typical contracts can be for 6 months through to 24 months. While contractors often earn more than being a permanent employee the banks are a little more hesitant in lending to them. A fair risk to them is what happens if the contract is not extended. This risk is important for us as your advisor to mitigate in the application. We will comment on the industry you work in and the demand for your type of work, your experience in the industry and your previous work experience. This can build comfort for the bank on your income to service the loan. Again by going direct you will most likely not get the opportunity to let the lender know this background or you might do but the lender might not present this to their credit team.
Financials For The Self Employed
Being self-employed can make getting lending from the banks a bit trickier. If your trading fluctuates year on year the banks will often take the latest year. If this is down in profit this can impact how much you can borrow. Going direct to the bank you might not get the opportunity to explain the ins and outs of business and how this is reflected in your business financials. As an advisor we will take time to understand your business. By understanding your business we will also be able to better commentate on your financials. Things like did you experiance a one off expense which is not usually expensed which we can add back? Did Covid impact one particular year of the business, if yes we would get more financial years than usual to get the bank comfortable with your previous trading performance? Are your wages grouped in with other staff, if yes we would work with your accountant to separate your shareholder wage so we can clearly show the bank what you earnt personally, Did you have a profit after your wages and expenses? We can allocate profit according to your shareholding percentage as income? Sounds simple right, however quite often this can be over-looked and can be the difference in being approved or not.
NBS On Commercial Property
Looking to buy a commercial property. If the New Building Standard (NBS) is less than 67% the lenders will most not likely present the application to their credit team.
We would probe a little deeper. If NBS low and cost is low to bring up to the appropriate level for the bank we might be able to explain the relatively low costs to bring up to code, thus mitigating the low NBS rating.
In summary this is not a post discrediting bank lenders, as they do a great job. It is a post however about making sure your full financial position is covered, and all the potential weaknesses mitigated. It is important that the banks credit teams (who will spot weaknesses in the application) understand your full background and the mitigating factors that might kill that loan application without an understanding.
Take the time to get it right first time!
Touch base with Matt from Lendal for all your residential, commercial, business and developments finance needs.