Mortgages have been a hot topic in the last couple of years as interest rates were pushed to their highest in decades and house loan repayments unexpectedly skyrocketed.
A year later, many fixed rate mortgages have converted to variable and some 1.5 million or 30.2% of Australian mortgage holders are now at risk of mortgage stress.
That’s an increase of 539,000 people at risk of mortgage distress in just the 12 months to June last year.
Australians ‘extremely at risk’ have also risen to more than a million, or 21% of all homeowners, well above the average of the last 15 years.
In that environment, the ability to navigate mortgage refinancing and approvals has become more vital than ever.
Finance expert Gary Hemming from UK-based ABC Finance Ltd has suggested nine areas to consider to improve your chances of mortgage success.
What to watch for when applying
Your name as your fingerprint
In this digital age, we often underestimate how much of our identities have been revealed online.
Your name is something of a digital fingerprint, offering a link between multiple streams of information that may be connected to your individual identity.
Having a very common name that yields thousands of similar results can actually be detrimental to your mortgage application, especially if you happen to share a name with a notorious or convicted individual.
“Lenders or their automated systems may perform basic online checks as part of their due diligence,” says finance expert Gary Hemming, “If they find something concerning tied to your name, it might prompt further investigation, slowing down your application.”
Frequent cash deposits
Having a cash-heavy business model may negatively impact your ability to obtain a mortgage.
Regular cash deposits can be interpreted as a lack of financial traceability or even an attempt to hide or conceal income or assets – no matter how innocent the explanation may be.
“Even if it's just a habit of depositing cash tips from your job, it might warrant additional explanation to assure lenders of the money's legitimate origin,” Hemming explained.
Owning high-risk pets
While this would come as no surprise to those graduating from the rental market, having exotic or ‘high-risk’ pets can impact your mortgage application if the lender believes the pet could potentially damage your property.
Hemming recommends steering clear of large, destructive dog breeds or reptiles to reduce risk.
Social media activity
While a lender won’t spend time scouring your social media presence or connecting you to any potential anonymous accounts, particularly high-risk activity on your social media like bragging about financial misconduct or illegal activity will unsurprisingly have a negative impact on your application.
It’s an easy and potentially very important step to remove any risky content from your socials before an application.
Subscription services
While subscriptions are becoming an almost unavoidable expense these days as companies attempt to create consistent revenue streams, expensive or particularly extensive collections of paid subscriptions could impact your application.
“If your bank statements are littered with payments to various entertainment platforms, gyms, clubs and so on, it might suggest to lenders that your lifestyle expenses are high, potentially affecting your ability to make mortgage payments,” Hemming says.
Previous defaults
Ideally, avoid applying for a mortgage at a financial institution you’ve previously defaulted a debt with, as it could come back to bite you even years later.
Banks have long memories.
Online gambling
Engaging in gambling on a regular or high-stakes basis is objectively risky behaviour and proof of such via participation in online gambling or betting sites and apps is seen as a red flag by financial institutions.
“Subscriptions or frequent transactions with gambling sites, regardless of amounts won or lost, suggest a risk-taking behaviour that might concern lenders,” Hemming highlights.
Odd spending habits
Being prone to shopping sprees or impulse buys can also affect your mortgage approval chances.
“This doesn't just mean large, unexplained purchases,” Hemming stresses, “It could also refer to a pattern of impulsive buying or erratic financial behaviour, indicating poor money management skills.”
Unusual occupations
In this age of rapidly emerging new sectors and skills, there are plenty of unconventional career paths out there to be pursued.
Unfortunately, jobs in emerging industries, gig economy-based roles or positions heavily reliant on commission or bonuses make it difficult for financial institutions to access your income stability and can pose a challenge to proving reliable income.
“Securing a mortgage is already a daunting task and these unusual factors don't make it any easier,” Hemming says.
“However, being aware of these potential pitfalls can help you navigate the process more smoothly. It's crucial to present yourself as a reliable candidate not just financially but in aspects of your life you might not have considered relevant.
“When in doubt, consulting with a mortgage advisor can help you address any concerns and improve your chances of approval.”