Recently, there’s been conversations about lenders offering simplified or streamlined refinance processes. These processes may feature reduced interest rate buffers and/or see the lender relying on a simple declaration about income and employment.
Connective has no difficulties in principle with a credit representative assisting a borrower refinance to a lower cost product under a simplified or streamlined refinance process when the broker’s borrowing capacity (a core responsible lending test) is the only factor that prevents them from proceeding.
In these situations, each of the following must be satisfied:
Under the proposed loan, repayments must be less than what the borrower is currently paying when compared to their existing mortgage.
The borrower must have problem-free repayment conduct on their existing home loan and other liabilities.
The proposed loan does not require lender’s mortgage insurance.
The proposed loan can be P & I or interest only.
The proposed loan must service on the basis of P & I repayments.
The borrower must have had no adverse or significant change to their income in the last 12 months.
There must be no foreseeable adverse or significant change to income that might make the proposed loan unsuitable.
The broker must verify income and expenses (including current loans).
The proposed loan term does not need to match the remaining term of the current loan if the customer's best interests are met.
Proceeding with the loan must be demonstrably in the customer's best interests to mitigate any servicing shortfall when assessing borrowing capacity.
The lender's specific requirements must be satisfied.
Record keeping
The broker's notes and BID commentary in Mercury must evidence all of the above, particularly the quantifiable benefit to the customer. The lender's modified servicing calculator (in PDF) must be on file and all of our other responsible lending and best interests duty expectations must be met and evidenced.
Please note: Connective’s mandatory supporting document requirements must be obtained for all refinances. More information can be found here.