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Are you in danger of not being able to refinance?

Did you know that your everyday spending habits can hinder you from being able to refinance?

In a recent news.com.au article, Martin North from Digital Finance Analytics said that 'about 40 per cent of people who tried to refinance were unable to' and 'if you go back a year, it was 5 percent'.

As he shared in the article, tougher lending standards have restricted lending criteria which means that it's getting harder to have a loan approved. Although the market is tightening all over, Mr North said that 'half the people applying for refinancing were doing it purely to get their monthly repayments down'.

This is a great strategy but must be accompanied by a review and likely reduction in spending eveidenced with consistency over the preceding three months. We expect that banks will shortly be requiring this evidence of everyday spending as well as savings. This will mean borrowers will need to provide spending bank statements to a potential lender before being considered for a loan.

This is a serious game changer and has a significant impact on potential borrowing capacity. It's likely that some loans that were approved a year ago would not be approved if the application was submitted now.

The bottom line is manage your expenses and place yourself in the best place for refinancing, should you need to. Also a tip for those getting close to the 50 age mark; banks are often now requiring an 'exit strategy' which is a plan of how you're going to pay the entire loan off before retirement.

If you think that spending might be an issue for you, or you're not sure what you're spending, feel free to download our Budget Tracker and track your spending for a couple of months to see how you're tracking. Download it here.

Original article here.