What a bank will never ask you but you should ask yourself when buying a home.
Tao Hsu
At BBB we regularly field questions about borrowing capacity for buying property.
I want to raise a key question that banks don’t ask but you should ask yourself especially if you are buying a home.
As you’d expect, the banks have a standardised way of assessing someone’s borrowing capacity based on the age, profession, income and expenditure of the borrower. The bank needs to know they will be repaid and they assess their risk about the full repayment of the loan.
They don’t assess whether you are likely to retain that property after the loan is repaid. It’s not their role; they are there for a specific transaction: take a calculated risk, get repaid with interest for the risk they assumed during the holding period of the loan, then find a new deal. The bank is not your life partner despite their emotional marketing campaigns.
This is why at BBB Partners we have a team of professionals to help our clients navigate through the lending process whilst liaising with your financial advisor and/or accountant to ensure your financial goals are achieved.
When you hold an investment property and need access to capital, you could sell your investment property. But with your home it’s different. You are likely wanting to sell your home on your terms: when you decide it’s too big or you want to move to a new location.
During my time as a financial adviser, I have seen many situations where clients are likely to pay off their loan but they will be forced to sell their home after the loan is repaid because they don’t have enough assets to generate a passive income once they reduce or stop work. Alternatively they retain their home but would need to change their spending habits dramatically.
