If you’ve been thinking about putting your next family holiday or your planned renovations on to your mortgage, then you might be in for a surprise.
Changes coming to the Credit Contracts and Consumer Finance Act 2003 (CCCFA) in December, mean that there will now be new minimum standards for assessing a borrower's affordability and ability to repay the loan. Expenses will also be looked at more in-depth, and one-off expenses will also be taken into consideration, rather than just fixed expenses.
Come December 1st, these new credit rules will mean that topping up your home loan will become a lot harder, as it’s likely to affect lending for things such as top up for renovations or extra cash for things like holidays or other purchases. Instead of being able to easily draw down extra money, lenders will now require in-depth documentation around why a borrower wants to increase their loan. Things like renovations will require quotes provided from builders etc, to prove the amount they are wanting to borrow is the correct amount required for the renovations. It will be a lot harder to draw down extra cash, and there will have to be a good, and proven, reason for this.
Additional criteria will also be included around how long the top up takes to pay off. For example, you might have a 25 year term for your home loan, but may only be granted 5 years to pay back the top up amount.
This will make things harder for borrowers who are looking to top up their loan and while the rules do seem a lot, these measures are being put in place to ensure that borrowers don’t end up with loans bigger than they can afford to pay back, should things change.
If you are unsure how these changes might affect you, then please get in touch with us and we can talk you through it.