Investors' address now impacts loan eligibility
Where an investor lives is frequently being found to have a bearing on their ability to obtain a home loan, according to one mortgage advisory group.
The suburb or postcode in which a loan applicant lives is becoming a factor in determining their credit score, explained Smartline Personal Mortgage Advisers.
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With mortgage advisers reporting ‘postcode concerns’, Smartline’s executive director, Joe Sirianni, told Smart Property Investment that if there is a pattern of high levels of mortgage defaults and arrears in a certain location then lenders will look to minimize their risk by restricting their lending.
While unsure when lenders first started to look at this factor, Mr Sirianni said that since the Global Financial Crisis this is increasingly becoming the case, with banks better able to gain access to funding if they can show that their loan book is in good order.
“This has forced the banks to adopt numerous risk avoidance strategies that include minimising exposure to areas that have been proven to show high loan arrears. Just as insurance companies have always minimised their exposure to areas with high claim rates,” he said.
Both the current address and the address of where the property is being purchased are considered.
When asked if investors can check whether they are in an area with mortgage arrears, and therefore a more difficult area to achieve a loan within, Mr Sirianni said that it isn’t a possibility for those applying for loans to find out.
“[Even] the credit managers that assess the investment loan applications would not necessarily know about this information as it is coded into their automated credit scoring systems,” he said.
“An experienced mortgage broker in the particular area would have a fair idea that their area is proving difficult with particular lenders but there is no hard evidence.”
