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A lender has updated its credit policy to require brokers to explain the source of their clients’ “genuine savings” for high LVR loans, in a bid to ensure that it “continues to lend responsibly”.
NAB-funded wholesale lender Advantedge has announced changes to its credit policy, effective 19 November.
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As well as continuing to require 5 per cent genuine contributions to be confirmed for all loans with a loan-to-value ratio (LVR) of over 90 per cent, brokers will be required to provide documentation which explain the source of a borrower’s “genuine savings” contribution and whether the funds are repayable for all property purchases.
“For all property purchases, Advantedge must understand the source of the customer’s contribution (funds to complete) and whether these funds are repayable.”
Advantedge said that it has updated its policy to “clarify the acceptable and unacceptable forms of genuine contributions”.
Acceptable forms of genuine contributions include:
- equity in the residential property security or any other residential property
- funds accumulated in a savings account or term deposit for three months or more (including where these funds have been transferred to pay the required deposit)
- shares held as verified by a share certificate or holding statement (including deferred shares from an employer which have vested)
- funds held in trust, with evidence of contributions from the customer (i.e. transfers from a personal account or directly credited by their employer)
- government-approved first home buyer schemes (i.e. superannuation salary sacrificed contributions)
- tax refunds
- sale of real estate or other assets
- rental repayment history must be demonstrated over a minimum six-month period, verified via a letter from the registered real estate agent detailing the following:
- full name of tenant/s
- address of the tenanted property
- commencement date of tenancy
- amount of rent paid per cycle (e.g. weekly, fortnightly, monthly)
- confirmation of acceptable rental repayment history (i.e. no missed payments)
Unacceptable forms of genuine contributions include:
- First Home Owner Grant
- gifts or inheritances
- gambling proceeds
- loan-funded deposits
- advances on wages or commissions
- rental discounts
- builder or vendor discounts or finance or incentives
- compensation
- employer superannuation contributions (does not include employee voluntary contributions)
- funds held in company/business trading accounts (borrowed funds are not acceptable sources of genuine equity).
Advantedge noted that its current policy would be applied to all new applications (including increases) submitted prior to close of business on Friday, 16 November 2018, while its new policy will be applied to all new applications (including increases) submitted after close of business on Friday, 16 November 2018.
