Tens of thousands of ‘mortgage prisoners’ may now be able to refinance their home loans to more affordable interest rates, following the introduction of a new policy developed by our Aggregator, Australian Finance Group Ltd (ASX:AFG).
AFG has recently announced a new policy enabling Awesome Lending Solutions to recommend home loans based on lending criteria that cuts the current 3% per cent serviceability buffer on lending assessments to 1%. Providing you met the criteria to be classified as a ‘mortgage prisoner’. As as usual it’s the “Four C’s of Credit”
Those criteria include;
Good Character – so good repayment history on your existing loan and other liabilities.
Good Cash-flow – No adverse changes to their income or expenses over the past 12 months.
Good Collateral and your Contribution – so the loan being refinanced must also be the same amount over the same remaining loan term.
Lenders currently offering mortgages with a lower serviceability buffer include
Granite,
Liberty,
Westpac and its brands (Bank of Melbourne, St George Bank and BankSA).
Commonwealth Bank (CBA)
National Australia Bank (NAB)
AFG Home Loans will also soon have an offering available, and many more lenders are expected to come on board to capture the strong demand to offer ‘mortgage prisoner’ customers a better interest rate home loan.
The term ‘mortgage prisoners’ is used to describe customers who are locked into a home loan with a lender at an interest rate that is higher than current available market rates. A ‘mortgage prisoner’ can also be a customer who has rolled off a lower fixed interest rate and is now paying a higher variable interest rate.
A major reason for ‘mortgage prisoners’ inability to refinance has been the prudential regulator’s guideline of a 3 per cent buffer above the lending interest rate to meet repayments. A loan carrying a 5.5 per cent interest rate would therefore be assessed on the ability to make repayments at 8.5 per cent.
Although mortgage refinance applications will still be assessed under the 3 per cent serviceability buffer, a modified buffer can be applied under ASIC’s Responsible Lending guidelines which state that it may be reasonable to take fewer steps if new financial obligations can reduce a customer’s repayments and improve their financial position.
Like to discuss your situation – contact us at Awesome Lending Solutions