Net Asset Position Increasingly Important To Securing A Home Loan

July 28, 2010 - PRLog -- While the level of assets a borrower has acquired, or net asset position, has always influenced the way banks lend money, this has become increasingly more important in recent months, according to Smartline Personal Mortgage Advisers.

Smartline Managing Director Chris Acret said a number of factors were assessed to avoid the possibility of default in borrowers who have a high income but low net assets.

“From the banks’ perspective, a borrower’s income to net assets ratio goes to the core of their character,” Mr Acret explains.

“If you’re the sort of person who can convert your revenue into wealth – or assets – it demonstrates to the lender that you are the type of person who is likely to make your home loan repayments.

“A person who has accumulated a low level of assets by middle age probably has a focus on lifestyle rather than wealth creation, and they’re not the type of customers banks are necessarily wanting in this current environment.”

Mr Acret said the older a borrower was, the higher the net asset position banks expected to see.

Similarly, the higher your income, the greater the banks’ expectation that you will have built up a substantial level of assets over the space of 15, 20 or 30 years of employment.

“If you’re young and haven’t yet had much time to build up your assets, that is acceptable to lenders, but if you are 50 with no assets and you earn $150,000 the banks are going to question why that is the case,” Mr Acret said.

“It all comes back to perceptions around character – if you haven’t built a solid net asset position by middle age, the view of the banks is that you are unlikely to do so.

“Obviously there are also mitigating circumstances such as divorce or sickness which can explain a seeming irregularity.

“Therefore, it’s important that your mortgage adviser discusses these issues with you so they can then cover them off in their discussions with the bank.

“Also, no two lenders are the same and there are many aspects taken into consideration when a lender is considering your application for a home loan.

“Seeking the advice of an experience mortgage adviser who has access to a panel of lenders can be invaluable no matter where you are in life.”

For help in finding the right home loan for you and maximising your borrowing power contact your local Smartline mortgage broker here; http://www.smartline.com.au/findaconsultant.html

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Established in 1999, Smartline is a multi award winning franchised mortgage broking group, having built a unique reputation for advice and client care.

The group’s 200 franchise offices have assisted over 100,000 Australians arrange their home finance to date. 85% of Smartline's business comes from a personal recommendation. As part of every loan Smartline arranges, the company donates $10 to charity.

Smartline’s Managing Director is Mr Chris Acret and its Executive Director is Mr Joe Sirianni.