Consumers who are interested in buying a residential property during the coronavirus or COVID-19 pandemic may have some queries before securing a home loan. These prospective homebuyers may feel more enticed to borrow some funds for the house they are eyeing. It is because they may have learned about the projected fall in home prices. Most economists forecast that there would be an average price nosedive of between 10 to 20 per cent Australia-wide. Furthermore, some of these economic experts are even predicting a 30-per cent decline in residential property values. Before availing of a home loan, prospective homebuyers will benefit if they get a head start on what they can anticipate from their lenders.
10 Scenarios That Borrowers Can Expect from Banks amid COVID-19
Potential homeowners who are interested in pushing through with their plan of purchasing a new home will typically need to take out a home loan. If they are buying their residential property at this time when the COVID-19 crisis is underway, it would be advantageous for them if they know the requirements and procedures banks carry out when dealing with homebuyers. Here are some key insights that prevail in the homebuying scene during the coronavirus pandemic:
(1) Banks heavily scrutinise a borrower’s employment and income.
(2) Right down to the settlement day, banks conduct stringent employment checks. They want certainty that a borrower’s income is ongoing. Moreover, the lenders make sure that homebuyers can fulfil their home loan repayments.
(3) Before the coronavirus crisis, some lenders would count 100 per cent of the alternative income as a component of the borrower’s home loan application. However, nowadays, they tend to count merely 60 to 80 per cent of the prospective homebuyers’ alternative income.
(4) Some banks today are assisting their clients in proceeding to settlement. Also, they help these potential homebuyers in avoiding the loss of their deposit. These situations usually take place if the home loan applicants can prove to their lenders that they have sufficient funds to cover the loan repayments in 6 to 12 months or the short term.
(5) Financial firms that offer personal loans for homebuyers typically demand confirmation from the applicants that their job and salary have not changed considerably due to the pandemic.
(6) If the applicant’s income got modified due to the COVID-19 crisis, lenders consider the capability of the borrower’s income to revert to what it was and think about how long that event may take.
(7) For loan serviceability, some lenders exclude the assessment of borrowers’ income in coronavirus-hit sectors, such as hospitality and tourism.
(8) Some banks have shut the door temporarily on borrowers in industries that the coronavirus crisis hit, including tourism and hospitality. Other sectors that loan providers have identified as especially risky for lending are retail; professionals in the sports, entertainment, and fitness industry; personal services like beauty service providers; and transport providers like taxi and Uber drivers.
(9) Customers who work in uncertain sectors or are self-employed may find it challenging to get lenders mortgage insurance, which is usually a precondition of the personal loan for homebuyers.
(10) For self-employed borrowers, some banks have lowered the Loan to Value Ratios or LVRs, unless those personal loan applicants serve in the Medico industry.
With these prevailing situations that homebuyers can expect nowadays when buying their desired residential property, some applicants may find it tougher to take out a home loan. These prospective homeowners usually comprise the self-employed and those who work in sectors facing uncertainties at the moment due to the COVID-19 pandemic. Indeed, borrowers may find plenty of obstacles that they may need to jump through today. Nevertheless, they can communicate with their bank or mortgage broker to learn about their choices and be able to continue the homebuying process.
COVID-19 Crisis as Ideal Time to Purchase a Residential Property
The coronavirus pandemic may have altered the plans of potential homebuyers because it has left most consumers in limbo. Governments required people to remain indoors for quite some time, which led to the deferral of personal plans. Nevertheless, according to Michael Yardney, the COVID-19 crisis is the perfect time to purchase a house for homebuyers with organised finances as well as the financially secure consumers. Furthermore, he recommended investment property investors and households who have a continuous and stable income to buy a residential property now. The chief executive officer and founder of Metropole Property Strategist cited the following scenarios which make the global healthcare crisis ideal for homebuyers:
1. The attractive prices of homes today were unavailable to prospective homeowners a couple of weeks ago; and
2. Consumers can take advantage of the historically low interest rates.
Yardney cited that history had demonstrated that house values usually surge after the most significant economic disruptions, such as the global financial crisis. He affirmed that people who bought a house during the coronavirus pandemic could perform it with the certainty that they would be purchasing towards the lower spectrum of the market. Furthermore, the Metropole Property Strategist administrator relayed that there would surely be opportunities in the market for consumers willing to go against what is typical. Yardney remarked that, after five to ten years, these homebuyers would look back and recall the unprecedented happenings of 2020 as a remarkable residential property-buying opportunity.
Yardney advised the prospective homeowners not to make long-term decisions according to the news cycle as these consumers may be willing to take advantage of the lower home values. Home Loan Experts dittoed Yardney’s insights. The company affirmed that taking out a personal loan for homebuyers amid the coronavirus crisis is still ideal. However, Home Loan Experts advised homebuyers that they need to be capable of managing risks.
The real estate professionals from the firm that specialises in offering advice to prospective homeowners said that consumers could move forward to settlement if they have discovered the property they like and got pre-approved. But according to Home Loan Experts, possible homeowners may have to lose their deposit. Also, these consumers may have to pull out of the housing sale. The specialists relayed that these situations could take place if the homebuyers lose their means of livelihood and could not afford the personal loan anymore while mid-contract and prepared to settle.
The coronavirus crisis may, indeed, be the ideal time for borrowers with a stable income to take out a home loan. These homebuyers can take advantage of the interest rate that has reached the lowest level as well as the affordable house prices. The Australian economy may gain momentum eventually, and this condition may lead home values to bounce back. Hence, the consumers should speak to specialist mortgage brokers now to get pre-approved for a home loan and continue pursuing their homebuying plan for this year despite the coronavirus crisis.