Will new lending regulations affect your ability to borrow?

Recent changes to the Credit Contracts and Consumer Finance Act 2003 (CCCFA) have been a contentious topic, with many borrowers concerned their about borrowing ability.

However, it’s important to understand that these changes focus on the gathering and interpretation of documentary evidence of a borrower’s ability to repay a loan.

Intended to protect Kiwis from overextending themselves, the regulations are causing lenders to review and in many cases change their assessment practices.

Regular spending habits

On top of your ongoing bills and living expenses, lenders are generally taking a closer look at your current spending patterns as part of their assessments.

Things like streaming subscriptions, take-away food and buy now pay later services will all be considered and used to determine if there is sufficient surplus within your budget.

So, in the months leading up to your loan application, it’s worth cutting down where you can to help ensure there are no bumps in the road.

Loan exit strategies

For borrowers over the age of 50, lenders will require a strategy outlining how you plan to pay back the loan.

While some borrowers may intend to continue working until the loan is repaid in full, others may consider topping up the loan through their superannuation or KiwiSaver.

Other repayment options include the planned sale of property or assets, revenue from investments or income from renters.

Help is available

It’s a good idea to get your finances in order before speaking to your lender – but you don’t have to figure it out on your own.

A Mike Pero Mortgage Adviser can support you to prepare and help you explore your options. To find out more, contact your local Mike Pero Mortgage Adviser today.