During uncertain times, it pays to know what’s driving the decision-making of the banks. Graham shares how the mood of the banks is changing with the times.

Ever since I’ve been a broker (nearly 20 years), banks have looked at your income history as a tool for working out what you can afford to borrow. However, now it’s more about your future income potential, because, from a bank's perspective, the future is a little shaky so let's prepare for the worst.

Overall, banks are getting more conservative with their assessments of who they lend money to and also what they do with the proceeds of the sale from the house you have just sold. All banks are now assessing your ability to keep the lending you have when you sell a property. Just because you think you are going to get a nice cheque after you have sold a property doesn't necessarily mean you will, as the bank may decide to keep the proceeds to pay down your remaining debt with them.  

So, knowing this, what do we do? Well, as borrowers, the strategy is also to prepare for the worst. And the messages we have been saying for a long time are truer today than ever.

For example, if you have multiple properties, don't have all the lending at one bank. Have your business banking and your personal banking at separate banks. On a regular basis, assess your ability to free up properties from the bank’s clutches—a little dramatic perhaps, but basically try to give the banks as little hold over you as possible. Plan ahead of time which investment property is the first one to be sold and structure for that ahead of time.

Confused?

Give us a call to discuss what your options are to prepare for the end of the world ... well, the end of the lending world.

Graham Goodisson is a Registered Financial Adviser with Velocity Financial. No investment decision should be taken based on the information in this blog alone. A disclosure statement is available free of charge upon request.

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