Positive Changes to Regulations for First Home Buyers
In August 2022, we wrote an article explaining the initial changes made to CCCFA Regulations. Further changes have been announced this month, which will be good news if you’re trying to get on the property ladder.
In short, how you spend your money no longer limits your opportunity to apply for a mortgage. If you were worried how your discretionary spending will affect your chances of getting a mortgage for your first home, recent amendments to CCCFA Regulations may ease some concerns.
This month the Government’s earlier announced changes under the Credit Contracts and Consumer Finance Act (CCCFA) Regulations came into force to ensure Kiwis are not being unfairly penalized when applying for a loan or mortgage for a house. These changes specifically exclude using discretionary expenses from affordability testing.
But what is discretionary spending? This refers to spending that is non-essential and it can look different for everyone. Things like luxury items, cars, holidays, entertainment, and takeaways are examples of non-essential (or discretionary) spending.
The new regulations also provide more flexibility for Lenders about how certain repayments are to be calculated, and they extend exceptions from full income and expense assessments for refinancing of existing contracts. And don’t worry, changes to the law clarify that when a Lender is investigating with ‘sufficient detail’, that refers to any information that you as the Borrower choose to provide directly. The Lender cannot look at information relating to bank transaction records. There is also no need for Lenders to inquire into current living expense from recent bank transactions
Overall, the new law requires Lenders to look at your expenses as a broad assessment. This means that Lenders take into consideration your entire circumstances with good detail. If you decide to buy a coffee every day, press ‘order’ on that online shopping list, or shout yourself something nice, it doesn’t mean that you are stopped from getting a loan.
Ultimately, how you spend your money is not a deal breaker anymore!
If you’re unsure how the changes will affect your chances of getting a mortgage in place, get in touch a member of the team who will be happy to guide you through the process.