On 7th of July, some of the CCCFA rules were changed to remove regular ‘savings’ and ‘investments’ as examples of outgoings that lenders need to account for when assessing the borrower’s likely expenses.
A case study on what the changes mean:
Peter and Pam (who are clients of both Mike and James) work as a doctor and engineer respectively. They have about $800k of existing debt. The couple were looking to buy an investment property in Auckland, they were really good at managing their finances, were saving regularly and weren’t spending above and beyond their means. They went to their personal banker and put in an application to borrow $1m. The bank came back and declined them the application.
Peter and Pam then came to us for a second opinion, we created the mortgage application and we effectively sent the same application back to the bank. With some tweaks around their expenses and the categorisation of those expenses, the main one being savings and regular investments, not being a fixed expense but being a discretionary expense, we were able to get them approved for $1.2m
The fundamentals of the application didn’t change, nothing about their spending changed and nothing about their habits changed.
The reason that a mortgage adviser was able to get this over the line was the advice that they were able to give. Due to the CCCFA regulations, the bank wasn’t able to say “If you tell me you’re going to stop saving $1,000 a fortnight, you’ll get approved” Whereas a mortgage adviser is able to give that advice on how to better present your application to the bank to get your approval over the line.