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Parents whom lend to their children will now need to have repayment plan documented as banks tighten up post-retirement mortgage repayment plans

Parents whom lend to their children will now need to have repayment plan documented as banks tighten up post-retirement mortgage repayment plans

Major bank introduces new serviceability probe

Brokers will now be required to document their clients’ post-retirement mortgage repayment plans, with a big four bank updating its credit policy as part of its commitment to “lending responsibly”

NAB has announced changes to its home loan serviceability policy for borrowers approaching retirement age.

 

From Saturday, 25 July, brokers will be required to enquire about and document their clients’ mortgage repayment strategy post-retirement.

 

After identifying their clients’ planned retirement age, brokers will be required to assess the borrower’s repayment strategy based on specific metrics set out by NAB, which determine the level of “enquiry, supporting documents and verification required to satisfy the policy”.

 

For example, if a borrower is over 55 or plans to retire in the next 10 years, the application will need to include:

  • at least one co-applicant under the age of 55
  • or within 10 years of their intended retirement with “sufficient income to service the home loan at drawdown”.
  • evidence of financial assets worth at least 100 per cent of the loan limit; or
  • evidence of a plan to downsize an owner-occupied home (with at least $200,000 in available equity at drawdown) once the applicant retires.

According to NAB, the new policy is part of its commitment to “lending responsibly” and ensuring that prospective borrowers “understand the potential impact of home loan repayments”, particularly upon retirement.

NAB’s changes are the latest of several revisions to credit policies in recent months, with lenders reducing their risk appetites in response to growing credit quality concerns off the back of COVID-19.

 

Tim K. Dean, Credi Founder | Commentator & Expert on Family Lending, Bank of Mum & Dad and Neo-Credit Scores is available for media interviews and appearances. More…

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