flagFounded: 1834

businessOwned by: ASX Listed

monetization_onFunded by: Retail deposits and wholesale capital markets

securityLMI Provider: QBE LMI for NAB

account_balanceLender type: Major Bank

NAB is a popular choice for many home buyers and investors with an award-winning range of home and investment loans.

Occasionally, they’ve got some great interest rates, especially negotiated rates for home loans over $1 million. They also have some policy niches which allow some people who can’t qualify with other major banks, get approved.

How do NAB’s home loans compare?

They’re great at

But they’ve got some drawbacks…

  • Their customers with loans over 3 years old are often on much higher interest rates!
  • They have many restrictions with their family guarantee (guarantor) loan product and there are much better no deposit home loans available from other lenders!
  • Their credit scoring is tough and you may get declined for no apparent reason
  • Interest rates and fees are not always competitive if you have a small deposit
  • Getting approved usually depends on the experience of the credit manager handling your loan
  • They have restrictions on their maximum loan size, which penalises professional investors
  • They’re unlikely to help people with a bad credit history
  • They tend to make a lot of errors when dealing with construction loans
  • As they’re a major bank, you may feel like just a number

Coronavirus / COVID-19 Policy Changes: NAB

Temporary home loan policy changes announced by NAB:

  • Documents Requirement for verification – PAYG. It should not be older than 21 days from the application submission date for weekly/fortnightly and bi-monthly income payments, 30 days for monthly payments and 90 days for payments made less regularly.
  • For casually employed borrowers, we need to verify 6 months’ income along with the most recent income being credited to the bank account.
  • Shading for income such as overtime, commission, bonus, and investment income has been increased to reflect the uncertainty.
  • They’re still accepting rental income from both new and existing investment properties (70%-80%). However, if you have holiday or part property rental (such as Airbnb, individual room rental, holiday rentals, etc.), these are no longer being accepted by NAB.

In regards to the guarantor loans, what NAB has stopped offering:

  • Family pledge (guarantees),
  • Servicing guarantees (if borrower and guarantor are NOT in a spousal or de-facto relationship).
  • Security guarantees.

We have other lenders that can still do these types of guarantor loans.

What NAB is continuing offering:

  • Spousal and de-facto guarantees (servicing guarantees if borrower and guarantor are married couple or de-facto).
  • Company director guarantees (company borrower and company director to offer personal guarantees).
  • Trustee guarantees (trust borrower and trustee to offer personal guarantees).
  • NAB has also introduced additional requirements for home loan applications in light of the recent coronavirus pandemic, particularly in regards to making extensive enquiries into a borrower’s financial situation.

    The bank now requires a COVID-19 specific template to be submitted along with an application.

    In the template, questions about the immediate impact of COVID-19 or future impact on the customer’s job or income stability, whether or not they’ve requested any loan repayment holidays or are accessing Jobseeker payments needs to be answered.

    NAB’s turnaround time for a pre-assessment is 8 business days, and that jumps to 15 business days for a full assessment.

    Please note that this may change from time to time so please check with us before applying for up to date information.

    NAB mortgage relief: Is NAB freezing mortgage repayments?

    NAB has announced that customers affected by coronavirus (COVID-19) will be able to take a home loan repayment holiday (repayment pause) for up to six months.

    During the repayment pause period (max 6 months), interest continues to acrrue on your mortgage, which is added on top of your home loan balance. Your mortgage balance will have increased at the end of this period.

    Alternatively, NAB recommends that if you’re ahead of your repayments or have funds in offset or redraw, you can reduce your monthly repayments to the minimum or access your redraw or offset to use your additional funds.


What’s the Loan To Income (LTI) Ratio?

NAB have a policy that your new home loan cannot exceed 7 times your total annual income. This includes PAYG, self employed, rental and other income types.

On the face of it, this seems to make sense and, of course, for a home buyer it works well. However, investors with significant negative gearing benefits are limited by this policy.

For example, if you earn $100,000, your mortgage cannot exceed $700,000.

For a home loan, you could typically only afford $600,000 or so anyway but investors could easily afford over $1,000,000. The problem is, they would be unable to get approved because of their income.

As a result, we find that, generally speaking, you shouldn’t apply with NAB if you have several investment properties.

NAB may not approve as much as you can afford, which limits the growth of your property portfolio.


What home loans types do they have?

NAB’s Choice Package is their most popular home loan for people borrowing more than $250,000. You’ll pay an annual fee in return for a lower interest rate for the life of the loan. You’ll also get discounts on a range of banking products such as your offset account and credit card.

NAB’s Base Variable Rate Home Loan is a good choice for loans under $250,000, however, we think that other basic home loans from other lenders tend to be cheaper.

With Fixed Rate Home Loans, NAB tends to have occasional specials that puts them as the market leader. When they don’t have a special, it’s best to apply with another lender.

They also have FlexiPlus Mortgage and Portfolio Facility but they are far less popular.


Morgage insurer Genworth dropped by NAB

NAB has dropped Genworth as one of their mortgage insurers, and going forward will be working exclusively with QBE LMI. All new NAB customers will have QBE as their LMI Insurer.

They will only continue to work with Genworth to manage and support existing LMI customers.

Having a single LMI provider means:

  • A streamlined credit policy for NAB branch and NAB broker.
  • As mortgage brokers, we can access the same credit policy as NAB branches and can process loans we weren’t able to before.

How do I negotiate a lower interest rate with NAB?

If you’re applying for a home loan ask your mortgage broker to put in a pricing request with their relationship manager. NAB tends to offer good negotiated pricing for loans over $1 million and people who have a large amount of equity.

If you’ve got an existing loan you may find that NAB is quite tough to get a discount from. Like other major banks, their goal is to give you a credit card and cheque account with your home loans so that it’s a lot of work to switch banks. If your home loan is over 3 years old then you’re almost certainly paying too much!

A good mortgage broker will negotiate with the bank for you and if NAB won’t offer you a better deal then they can help you to refinance to a lower interest rate.

Tip for applying with NAB

Use NAB’s home loan application form to prepare for your mortgage application.

Note: This is the latest home loan application effective October 2017. Please refer to NAB Bank for their most up-to-date document requirements.


NAB no longer a good option for family guarantee loans

The NAB Family Guarantee loan is quite conservative in the realm of guarantor loans.

Typically, the parents are providing their home or investment property as additional security which allows their adult children to buy a home with no deposit.

However, unlike some other lenders, NAB still requires you to have a 5% deposit as well as funds to cover stamp duty and other costs!

Also, this type of loan can’t be used to buy an investment property and is not available if you or your partner if you have already purchased a property.

This restricts borrowers on lower incomes who get into the housing market by buying a small investment property rather than going straight into their first home.

If you’re interested in a family guarantee loan, read our guarantor loans page for information on what other lenders can offer.

Repayment at retirement

From 25 July 2020, customers will be asked about their home loan repayment plans when they retire.

In doing so, NAB wants to encourage its borrowers to set a realistic retirement age so that they can make repayments on their home loan after retirement.

Depending on when you plan to retire, NAB has outlined a few acceptable repayment strategies.

Your age at the time of application will determine which retirement status you fall under:

  • Imminently retiring: You are 55 years or older, OR you plan to retire within the next 10 years.
  • Not-imminently retiring: You are under 55 years and do not have plans to retire within the next 10 years.
  • Not applicable: You do not plan to retire during the life of your loan OR you’re already retired.

NAB: First Home Loan Deposit Scheme

NAB is one of the 27 lenders who is offering home loans under the First Home Loan Deposit Scheme (FHLDS).

The scheme allows first home buyers who have saved at least a 5% deposit to get a home loan without paying lenders’ mortgage insurance.


NAB client story: Victor, Vic

Goal

Situation

Multiple dwellings on one title, first home buyers.

Background

Renting and with a newborn at home, Victor and his wife needed a bigger place and wanted to get out of the rental rate race.

Victor was earning a great income in the IT industry and the couple had saved up a large deposit so they were looking to splash out on their first home.

They found just what they were after in a luxury property on a large acreage that was being advertised for $2.3 million.

The problem was that when they went to apply for a home loan, their lender wouldn’t accept it as the land actually had two properties on it, making it a dual occupancy property. This was despite having a 16% deposit to put towards the purchase!

Most lenders are very conservative when it comes to first home buyers wanting to buy multiple dwellings on one title so their application was declined purely because it wouldn’t be accepted by their bank’s Lenders Mortgage Insurance (LMI) provider.

Solution

After speaking with a mortgage broker, Victor was able to get his home loan approved with NAB, the only bank that has a Delegated Underwriting Authority (DUA) for loans over above $1.5 million. The total loan amount was $1,848,000.00.

They were able to sign off on the property on behalf of their LMI provider Genworth.

When assessing their income, NAB was also able to include up to 80% of their rental income from a couple of investment properties they owned.

Of course, since Victor was borrowing over 80% of the property value (LVR), the couple would be charged a large LMI premium.

Luckily, his father-in-law gave the couple a gift when their child was born so they were able to use part of that gift towards their deposit and borrow at 80% LVR, avoiding LMI altogether!


Compare NAB to other lenders

Not sure which lender is right for you? Our Home Loan Experts can help!

Talk to one of our mortgage brokers by calling us on 1300 889 743 or complete our free assessment form.