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Debt Consolidation Bad Credit Loans Home Loans

10 Reasons Your Home Loan Was Denied

Most people believe a good life is having that killer home and a stable job. But what happens when you try to apply for a loan and get rejected?  It can become increasingly disheartening to hear the same 9 words –  “we are sorry your loan application was denied.” In this article, we dig deep and reveal the reasons why your home loan was denied.

Understanding the reason behind your loan denial is a valuable learning experience. This reason helps you to pinpoint the areas of your financial life that need to be polished. You can always improve on this and reapply for the funding.

 Let’s dive right into the ten reasons why your home loan was denied

Poor Credit History

Credit history is simply a record of a borrower on debt repayment from several sources, including banks, collection agencies, or credit card companies. Potential creditors such as the Australian Lending Centre and other mortgage lenders use your credit report or information to decide whether they will give or deny you a loan. Your credit information is the right way for lenders to tell whether you are a risky investment or not. Having a poor credit history will deny you a home loan.

If you check your credit score and you find that you have defaults, blackmarks or court judgments, it is highly recommended that you remove these otherwise you will struggle to secure funding. There are specialised credit repair agencies that can assess your credit situation and work towards removing these negative listings.

Insufficient Income/Asset Documentation

One of the big reasons why your home loan application may be denied is due to your income or debt ratio. Your income is an excellent measure of whether you can or cannot afford the home. ALC is likely to enquire about your assets and, more specifically, your liquid assets. They’ll want to identify what you have saved to raise a down payment, pay closing costs, and make monthly loan payments once you close your loan.

You have to make sure that you have sufficient income or assets before you apply for a home loan. It is essential to have your resources in a certified account, at least two months earlier, to applying for a home loan. It is because banks and lenders regularly ask for your two latest bank statements. Also, make sure you verify your assets for a down payment, closing costs, and reserves.

Down Payment is Too Low

Typically when you buy expensive things on credit, you need to make a down payment. The down payment amount usually covers a portion of the market price of the home. Lenders look at the upfront amount as an investment in their future home. A low upfront may not put their minds at ease. To certify your home loan application, consider having a more significant down payment, or else your home loan will be declined.

Problems with the Property

Sometimes you are not the cause of a home loan denial. It is not always your fault. Your home loan denial may be due to problems with the property you want to purchase. Therefore before you apply a loan for a particular home, do thorough investigation and research about the property.

Inadequate Employment History

Your employment history is essential when it comes to a home loan approval. You should have a consistent job history when applying for a mortgage home loan. Most lenders will consider two years of steady employment history to process your loan. By doing so, they only want to be assured that you can hold on to a job long enough to repay the debt. Make sure to keep all your payslips and any tax information. You will want to make the process as easy as possible for lenders.

Inaccurate documentation

Home loan lenders want to know everything about you, and therefore, leaving out any information may raise the alarm. It is always good to provide all the required details and fill out all the sections on application forms.

Reduced Debt to Income (DTI) Ratio

Most lenders look at DTI Ratio before awarding a home loan. DTI Ratio is simply a sum of your monthly payments divided by your monthly income multiplied by 100%. You should always aim at 45% and below.

Unpaid Taxes

Taxes are significant to a country’s income. A due fee is another debt that can haunt you. It can lead to a robust rejection of your home loan application. Make sure to work through old debts before applying for a home loan.

You Asked for Unreasonably Low Loan

Most lenders give loans based on how much interest they will make. The lower the investment, the lower the benefit they will gain. Therefore, you should understand that lenders make money from interests that are higher on high loans than small loans. They factor their profit against their risk, so it is unlikely for them to approve a low loan request.

Bulky transactions

Just like receiving huge money, large transactions may raise red flags when applying for a loan. You should not make large transactions as you near a home loan application period. Stick to low operations and always be ready to explain the purpose of the transactions. Valid documents should accompany this.

Final Thoughts

Now that you have learned and you are well aware of the reasons that can lead to your home loan denial, you only need to rectify what is dragging you behind.  Make sure that all the above are taken care of before requesting a home loan, or else it can get rejected. If your loan is denied, remember it is not the end. Focus on building positive financial habits that will help you increase the likelihood of securing a loan.

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Mortgage Business Loans Renovation Loans

How to Get an Affordable Second Mortgage

By getting an affordable second mortgage on your property, you are not only increasing your borrowing power — but you can use the extra money for your other needs. If you planning to increase your overall borrowings, but you have an existing mortgage, the easiest approach is to refinance it for a higher amount. One of the most important considerations in getting a second mortgage is reducing your balances by up to 50 per cent! You may ask, “How is it even possible?”

The truth is that a lot of people incur interests due to unpaid mortgages which build up over the years. In doing so, they are not only reducing their home equity, but they are also putting their homes at risk of foreclosure. So, if you can successfully negotiate your balance reductions and avoid foreclosure of your property at the same time, grab that chance. It does not only help you save money and at the same time avoid legal actions that may damage your credit status.

Here are tips to help you get the most practical and most affordable second mortgage possible:

Research is key to an affordable second mortgage

You can search for public forums and blogs that talk about the best second mortgage options available for someone with the same situation as yours. It will help you filter debt settlement companies that are willing to work on your case for a fee. By doing your research, you will understand the importance of negotiating for balance reduction, the expenses you have to pay in the process and the available options for you in your area. Just make sure that you know how to filter objective from subjective advice. Otherwise, you may immediately take up an expensive service when there are less expensive ways of solving your mortgage problems.

Weigh the Pros and Cons of Second Mortgages

In reality, it only makes sense to get a second mortgage when you don’t have ready access to funds but want to pay for your mortgages and other high-interest debts. It is also a practical and low-cost alternative for those who want to start a business. Some people who are in serious debt also use second mortgages to consolidate debts. Before applying for an additional mortgage, ask yourself if it is possible to meet your financial need without getting another debt. Or, if the proceeds of the extra money you will get are worth the interests you have to pay for a long period of time.

Choose the right lender

Some mortgage applications take a lot of time. If you don’t want a very time-consuming process, like those in banks which discourage low-income applicants with low credit scores to apply by implementing very difficult qualifying criteria, go for alternative lenders like Australian Lending Centre. The company implements fast approval process because it often handles second mortgage applications and there are no errors and delays involved because the staffs are skilled and experienced in this type of loan. The fees are affordable and manageable as well.

After that, use the proceeds of your second mortgage top pay for your urgent needs. That means you need to learn to prioritise your needs-and spend only on those that would improve your financial situation. For example, if you still have a car which is up and running and you have a huge debt to pay, perhaps it would be wiser to pay off those debts before you buy your dream car.

Thoughts for Consideration on an affordable second mortgage

It is not easy to bring yourself to do all those things mentioned above. Almost everyone knows how difficult it is to get an affordable second mortgage especially if you have a poor credit rating. On top of it all, you may have developed financial habits that diminish your income and your financial strength. But, over time, with practice, you can break habits that you may have been practising for many years.

The pull to take advantage of a second mortgage that offers ‘high equity’ at the expense of high interest may lurk everywhere you turn. There are many loan sharks offering ‘quick approval’ second mortgage online. The ads may show people enjoying a dream vacation, staying in a lavish home or probably spending for a grand wedding despite their bad credit. But the truth is that, when you have a bad credit—you should be careful with whatever money that comes your way.

Remember that getting into debt is a financial decision with a huge emotional impact. There could be many personal and emotional hurdles that can get in the way of making the best financial decision. That’s why it is important to educate yourself about mortgages and how you can use them wisely to avoid self-blame and guilt when things don’t go as planned.

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Home Loans

What Happens When You Default On Home Equity Loans?

If the value of your home, or the amount you paid for it, is higher than your first mortgage or the principal, it means that you have equity in your home. You can tap into your equity by applying for a loan, secured by it. These can be a great option to acquire finance, but what happens if you default on home equity loans?

Here are the consequences if you default on home equity loans

1.The account will be sold to a collection company.

Unlike what other people think, foreclosure is usually not the course of action home lenders choose to recover the amount you owe. When you default on your debt, your lender may sell it to a collection company who will take it from there. They will call you, send collectors to your door steps or send demand letters to attempt to recover your outstanding balance.

standard-lawsuit2. Standard lawsuit

If the second mortgage holder decides not to foreclose, can it still recover the money it has lent you? Yes. In an attempt to recover payments, the lender may file a standard suit against you. It is less scary than a foreclosure where you will lose ownership of your home, but it can seriously hurt your credit score.

3. Foreclosure

In case of default, the holder of your second mortgage may initiate a foreclosure to recover the money it lent to you the moment your house is sold at a foreclosure sale. Since mortgage is a senior lien which takes priority over a home equity like a second mortgage (because the loan was registered earlier) the first lender gets paid first. But, what if you refinanced the loan—does it mean that the second mortgage lender becomes the first priority? It depends. Whichever lender has the certificate of title will be entitled for the payout first. If you were in the process of refinancing but it was never complete before the foreclosure on the property and you didn’t pay the previous lender out, they are not eligible for the funds. If your previous lender still holds the certificate of title, then they are the ones who need to be paid out.

avoid-consequences

Here are tips to avoid the above-mentioned consequences of not paying your home loan on time…

Don’t hide from your creditors.

They will not be so enthusiastic in working with someone who avoids their calls, ignores their letters and refuse to cooperate with their offer to help for a few months. Remember that most mortgage lenders will work with borrowers who are struggling to make payments to encourage payment. So, if you’re missing payments, contact your lender right away. Inform them about your current financial situation and express your willingness to work out a repayment plan suited to your condition. Your lender may modify the terms of your loan, lower or raise the interest rate, increase or decrease the monthly payments, depending on your situation and financial capacity. It can also be a combination of the abovementioned options to make the home loan more affordable.

Explore available options to avoid foreclosure

Are you struggling to make your second mortgage payments? If foreclosure is imminent because of default, check out some of the alternatives to foreclosure that Australian Lending Centre offers:

If you want to consolidate your debts into 1 easy-to-pay, low-rate loan with low monthly repayments, get your finances back into order with a debt consolidation loan. Learn more about home equity loans and the suitable financial solutions available for you by calling 1300 138 188 today!

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Mortgage

The Reality of Mortgage Repayments

In spite of the loan solution you carefully select, you should comprehend the way in which a loan works, and what it implies. Understanding the reality of mortgage repayments is the first step to making the right decision to fit your financial status.

Understanding Interest

Recently, Australians have benefited from low and attractive interest rates. So, how does this influence your mortgage repayments? Mortgage providers grow or diminish their rates, to mirror the movement exercised by the set cash interest rate. At the moment, interest rates are estimated at around 4.5 per cent, depending on the lender.

Although selecting fixed mortgage repayments over variable ones might seem the right choice, as it protects you from fluctuations, some other aspects should be considered. If you’re locked into a variable home loan, when the cash rate lowers, your interest will also decrease. Even though this is an unmatched advantage, Aussies should know that low rates don’t plan on staying this way forever.

To grasp the way in which this phenomenon influences your mortgage repayments, hear us out. A standard variable rate for a 25-year old loan of $200,000 would have a $1112 monthly payment, with 4.5 per cent interest rate. If this would change with as little as one per cent, it will either rise to $1228 or diminish to $1001.

Also, bear in mind that, over the life span of a loan, fluctuations may reach $100 per month. What we’re trying to say is that you should embrace a repayment plan with the right contingency measures, in the case in which the interest rate spikes.

When the Loan Matures

You should also note that the market conditions are due to change. That is inevitable. In this respect, you should take advantage of whichever opportunity you have to refresh your financial approach. An option might be to discuss with your financial advisor. But, before doing that, there are some solutions for adjusting your mortgage repayments:

  • Refinancing: When the interest rates are low, you can always consider refinancing. That may be a more convenient option. Even though there are exit and entry costs that should be factored in, as a general rule, you’ll recoup those expenses over the life of the loan.
  • Pay ahead: If the interest rates are low and your budget enables you, you should consider getting ahead on your mortgage repayments. If you manage to make a considerable repayment during this time, not only that you will decrease your overall loan balance, but you’ll save a lot on interest rate payments.
  • Fix your loan: If your credit conditions are permissive enough, we advise you to lock in the new low rate.

To conclude, comprehending the market conditions does pay off. When you sign a loan agreement, you should know what it implies, how the market is due to change and how it can affect you.

In spite of your current status, don’t hesitate to refresh your mindset, in the case in which the market alters in your favour. Why shouldn’t you take advantage of it? Nonetheless, bear in mind that you should discuss with your financial advisor before taking the leap.

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Refinance and Refinancing Self Employed

Guide: Refinancing for Self-Employed Aussies

Being self-employed means that you’re going to have to put in a little more effort into finding the right refinancing solution for you. That’s exactly why we’ve put together a self-employed refinancing guide to help you get a clearer picture of what you should pay attention to, how to choose a loan and most importantly, how to find the best option for your needs.

Self-employed borrowers encounter difficulties when they’re looking to refinance their loan. This happens because financial institutions will take a closer look at their income and are sceptical due to not knowing how their business is going to progress.

This refinancing guide will tell you how to start when you’re self-employed.

Talk to a Lender

Finding the right refinancing package relies on how much you earn. According to your income, you’ll know the amount you can borrow and the limit.

Without taking to time to assess the situation, you may end up disappointed, so start slow and talk to a lender that will be able to give you some points on how to proceed and what you should know.

Do the Math

The second part of this refinancing guide is to calculate exactly how much you’ve made in the last couple of years. Two years is usually the amount of time relevant when discussing self-employed people.

Go through your records and place all your receipts in order.

Fill the Paperwork

Get your paperwork in order by gathering financial statements, a notice of assessments and income tax returns. Unfortunately, having a successful business doesn’t get you a free pass on all of these.

Although it’s time-consuming, without the necessary papers, it would be harder to convince a lender that your business is doing well and you can afford to refinance.

Are You Really Self-Employed?

Many people confuse being self-employed with sub-contracting deals or being a contractor. Some lenders might think that as long as you work for others, you might pass as an employee, which could help you skip some steps involved in this refinancing guide.

Be Honest about Your Expenses

A new piece of equipment, a few more employees or a training course might have raised your expenses the last year. Don’t try to hide them from your lender and explain the situation. There’s always a solution, even though it may not be obvious to you just yet.

Adequate Taxable Income

Unfortunately, this is one of the hardest requirements for a self-employed person. Saying and proving that you can afford to refinance a loan are two different things.

An adequate taxable income is a sort of like your green pass when looking into refinancing. Try to get the necessary paperwork to also prove it.

This guide to refinancing for self-employed contains the significant steps that you’ll have to make to refinance your loan when you are self-employed. There are benefits and drawbacks when you work for yourself, but seek professional advice if you’re having doubts about how to proceed.

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Refinance and Refinancing

Refinancing Analysed: Pros and Cons

Refinancing can be a convenient option in many cases, regardless if you are hoping to get a better interest rate or attempting to consolidate your existing debts. However, it can prove to be pretty tricky in the long run, which is why you may want to learn everything about the refinancing pros and cons.

This option may be perfect for one borrower and a disaster to another. This is why you need to do your homework and read the points below before switching to another loan system.

When Refinancing is Beneficial

When it comes to refinancing pros and cons, there are definitely some benefits you can reap by making the switch. Here are the main ones:

  • Getting Access to Equity – You can use the equity you collected in your loan for other things such as investing, renovating, buying a new car or going on a vacation.
  • Getting a Better Rate – You can get a better interest rate by refinancing, which means that your payments will also be lower. This could, in turn, save you a lot of money.
  • Increase Your Mortgage Length – By increasing the length of your payment, you will have a smaller monthly fee. However, you may end up with a higher interest, causing you to pay more in the long run.
  • Decrease Your Mortgage Length – The same can apply in reverse if you reduce the mortgage length. Not only will you get rid of the debt sooner, but you will also pay less in interest than before.
  • Eliminate Fees – You can sometimes get out of paying certain fees by refinancing a loan. If your current loan has built-in fees for additional features that you may no longer need, a refinance may help you get rid of some of these charges.

Refinancing can be a great way to make your payments easier, but you need to be aware of all the refinancing pros and cons before proceeding.

The Drawbacks of Refinancing

Just as there are refinancing pros, there are also particular cons. When checking out refinancing pros and cons, here are the few risks that you need to keep in mind.

  • Lender’s Mortgage Insurance – Whenever you get a loan, you need to pay insurance to the lender. If you change your lender, it means that you may have to pay that insurance again, even if you already paid it before. This may undercut most of the savings you hoped to get with the refinancing.
  • Longer Loan Duration – Refinancing means that you may have to pay for longer than you originally had to. This might put a damper on your plans if you had the intention to move out.
  • Extra fees – You may be required to pay certain exit fees from your own pocket, and these aren’t exactly cheap. Plus, you may be forced to pay even more entry fees upon refinancing.

Refinancing can be a great way to save some money due to its benefits. However, depending on the circumstance, this process may get you paying more than you should have if you are not careful enough. Keep in mind all these refinancing pros and cons before deciding.

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Refinance and Refinancing

Desperate Mortgage Stress Fuelled by Rate Hikes

Australian home owners are falling into increasing despair as interest rates continue to rise. Mortgage stress is hitting hardest even in what are deemed the more affordable parts of state areas.

As home owners struggle under the climbing mortgage repayments nation wide, more and more Australians are falling into debt. New figures released by debt collector and credit reference group Dun & Bradstreet expose a sizeable 12% increase in the number of debts referred for collection in 2007. Struggles to meet these mortgage repayments have ensured “unprecedented levels of bankruptcy and repossession and loan defaults” as Australian Property Monitors general manager Michael McNamara stated.

Mr McNamara described “Property prices have increased 250 per cent since 1996 but mortgage debt increased by five times in the same period.”

With so many Australians living on the knife’s edge, it is of no surprise people are looking for ways out. Loan Market chairman Sam White advised struggling borrowers to “consider re-financing” before it becomes too late.

If you need assistance with refinancing your mortgage debts, ALC can help. Contact us now on 1300 138 188.