Anyone that's a first-home buyer, or looking to get another mortgage for their rental property, this is a video you need to see.
The new lending law, that came into effect in December, has been updated. It was the CCCFA and there was a big drop in loan applications. Good people that could actually afford the loan, weren't getting the opportunity to get a mortgage because of the new changes. The idea was that they wanted to protect vulnerable people from getting into debt that they can't afford.
There are three keys things to look at:
1. What have they changed?
2. Why are they changing the CCCFA?
3. What do the CCCFA changes mean for you?
So a really simple one that they've changed is they are no longer recognizing savings and investments as outgoings, which makes sense. You know, like if you take on a mortgage and you're saving and you have investments, it makes sense that you might be able to use that for your mortgage? So why are you calculating that as an outgoing? The other thing is they were looking at the last three to six months of your expenditure and assessing: how much you're spending on Uber Eats? How long are you going on Netflix? Why are you wasting money on these trivial things?Which would impact your ability to get a loan.
Now they're putting less ownership on it. They're focusing on future spending because they recognize that people change their habits to meet the requirements of their debt. So essentially, less focus on how you're spending your money as opposed to how you will spend your money and not going through your transactions with a fine-tooth comb like they were before.
And the final piece is they’re going to have clearly defined examples so it's easier for lenders to recognize what they should do in certain instances. And that steps into the why.
Why are they changing the CCCFA?
Essentially, there's a huge risk for banks and lenders in terms of a fine. So because they didn't want to pay this massive fine they overdid it and are now trying to reign it back in.
So that's the main reason why they're trying to give clearly defined examples so this doesn't happen. The other reason is that there was a drop in loan applications and people that should be able to get loans weren't able to.
That wasn't their intention.
So they have made adjustments accordingly.
What do the CCCFA changes mean for you?
It makes it easier to get in a position where you can get a loan but things are still tightening up.
It's still harder to get as large a loan, as you did before, the big inflationary concerns and all those people rushing out to buy property. But, what it means for you, is that you should still have the habits that they set the criteria for initially. Still spend your money as though you have the mortgage now. Worst case scenario, you have a higher deposit.
Sure, the changes are good.
Sure, it's none of their business to go through three to six months of statements to assess your ability to fund the loan but you can still have the habits of someone that's going to pay down their debt because the sooner you pay down that debt, the sooner you can become financially free and can start enjoying life the way that you want to.
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