23 Mar 2023 Podcast: Q&A – Pre Approvals – Timing, Credit Scoring, HECS Debt & More!

Continuing on from our previous episode’s Deep Dive on Pre Approvals, Maddie hits Evelyn with the big questions on the topic including:

– How important are Pre Approvals?
– How long is a Pre Approval valid for?
– When should you apply for a Pre Approval?
– Do Pre Approvals impact your credit score?
– Should you pay out your HECS debt before applying for a Pre Approval?

Enjoy!

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You Have My Interest provides information and educational content relating to mortgages, finance and property. You Have My Interest‘s content is general in nature and does not take into account the individual financial, legal or tax needs or objectives of its audience members.

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Please find a Podcast summary below with the interview highlights:

Podcast Summary – “You Have My Interest” (Episode on Pre-Approvals)

The hosts, Evelyn and Maddie, mortgage brokers, start the podcast by acknowledging the traditional owners of the land. They dive into a Q&A session on pre-approvals following a deep-dive episode from the previous week. Here’s a summary of key points discussed:

Importance of Pre-Approvals:

• Essential for understanding borrowing capacity and reducing risks, especially for higher-risk applicants (e.g., self-employed, high LVR, or auction buyers).
• Simpler financial situations (e.g., stable income, strong deposit) may not require pre-approval as urgently.

Validity and Extensions:

• Most pre-approvals last 90 days, with some exceptions (e.g., Macquarie starts validity from submission date, ANZ offers 110 days).
• Extensions for another 90 days are possible by updating financial information.

Impact of Interest Rate Changes:

• Borrowing power may decrease if interest rates rise during the pre-approval period, especially for those at maximum borrowing capacity.
• Some banks hold the original assessment rate for the full 90-day validity, while others reassess based on updated rates.

Fully Assessed vs. System-Assessed Pre-Approvals:

• Major banks (e.g., CBA, NAB, ANZ) usually fully assess pre-approvals. Others (e.g., Macquarie, ING) may not.
• Fully assessed pre-approvals are preferred when rates fluctuate or for higher-risk scenarios.

Timing of Pre-Approvals:

• Best to apply about one month before actively buying, as processing times vary (typically 3–5 days, but can extend to weeks for some banks).
• If you’re not actively purchasing, a borrowing capacity estimate might suffice instead of a formal pre-approval.

Credit Score and Pre-Approvals:

• Credit scores are affected by pre-approval applications but less so than frequent credit card or personal loan applications.
• Refinancing regularly (e.g., every 6–12 months) may not harm credit scores significantly unless combined with frequent credit applications.

Financial Requirements:

• High LVR borrowers typically need 5% genuine savings (e.g., $30,000 for a $600,000 property) demonstrated over three months.
• First Home Guarantee Scheme applicants must provide detailed savings history, especially for larger deposits.

Hex Debt:

• Hex debt repayment is based on income, not loan balance, so it doesn’t significantly affect borrowing capacity. However, smaller Hex balances can be paid off to boost borrowing power.

The episode concludes with gratitude to listeners for their questions and an invitation to tune in next week. Evelyn promotes their platform for further financial education and support.

This summary encapsulates the practical tips and insights shared in the episode about navigating pre-approvals.