businessOwned by: ASX Listed
monetization_onFunded by: Retail deposits and wholesale capital markets
securityLMI Provider: Westpac LMI (WLMI) and Arch Capital (WLMI – A)
account_balanceLender type: Major Bank
Westpac has an impressive range of home loans and investment loans, an Australia wide branch and ATM network and a loyal customer base of over 13 million customers.
That being said, they’re actually not all things to all people. Their focus is primarily on high net worth customers and industry professionals such as medical practitioners. They see their other brands such as St George, which is owned by Westpac, as having a bigger focus on first home buyers.
How do Westpac’s home loans compare?
They’re great at
- High net worth property investors
- Customers who speak another language
- Waived LMI home loans for medical professionals.
- Bridging loans
- First home buyers who would like to buy with help from their parents
- Working with mortgage brokers
- Fixed rate construction loans
- Fast loan approvals
- In-depth postcode risk guide which can give you an insight into the market that you’re buying in
- Working with their existing customers
- Branch access
- Sometimes they offer market-leading refinance rebates and cashbacks.
- Priority refinance process is in place.
- Owner builder can be considered.
- Common sense approach to temporary visa holders.
- Fast track for self-employed is available with limited income documents required.
But they’ve got some drawbacks…
- Their interest rates are not always competitive
- Their LMI can be expensive
- Unlikely to help people with a bad credit history
- Borrowing over 90% of the property value is tough if you aren’t an existing borrower
- Their credit scoring is tough and you may get declined for no apparent reason, especially if you have a low income to asset ratio
- They don’t offer SMSF loans
- They no longer offer low doc loans
- As they’re a major bank, you may feel like just a number
- For self-employed borrowers, they are very conservative and require a consistent income over the last two years.
Coronavirus / COVID-19: Westpac home loan policy changes
Recently, Westpac announced several key home loan lending policy changes:
- For PAYG and casual employees, they now require payslips no older than 14 days, or previous payslips combine with current salary credit evidence, where the salary credit is greater than or equal to the payslip net payment.
- For self-employed customers, they now require the last quarter BAS, no older than 120 days from the last statutory BAS quarter (e.g. after 30 April, March quarter BAS must be used). And the corresponding BAS covering the same quarter for the prior year as well as the last 3 months bank statements /transaction summaries (all trading accounts) no older than 14 days.
- Westpac has also removed their special LMI waiver for accountants, lawyers, sports professionals and for entertainment professionals.
- LMI waiver for medical professionals is still available, but the max LVR has been reduced.
- The maximum LVR for self-employed home loans is reduced to 80%.
- There is income shading for bonus, overtime, dividends (other than own company), commission, interest, Director fees (other than from own company) and allowances.
- 100% overtime and allowances for emergency service personnel and it has been expanded to include Hospital employed doctors, surgeon and specialists.
- The construction loan drawdown period is extended from 12 months to 24 months from the loan offer date.
Westpac accepting JobKeeper payment as income
Westpac has updated its policy to accept JobKeeper payment as income.
JobKeeper payment as income will only be accepted for PAYG applicants who are working on either full time, part time or casual basis.
The lesser of your previous income or current income will be used, and you will be asked for additional documents like an employment letter as evidence for your new employment circumstances.
Westpac mortgage relief: Is Westpac freezing mortgage repayments?
Westpac’s mortgage relief option includes, allowing home loan customers affected by the coronavirus (COVID-19) to freeze their mortgage repayments (deferral) for up to 3 months, with a further 3 month extension available subject to a review.
Please note that during this period of no repayments, interest on your home loan continues to accrue and is added to your mortgage balance. Also known as interest capitalisation, this means your home loan balance will be higher at the end of this period.
By May, around 115,000 Westpac customers had already been approved for a repayment holiday.
Recently, Westpac also announced that:
- Eligible customers with interest-only home loan repayments can apply to extend their term for up to 12 months; and
- Those with principal and interest repayments can switch to interest-only repayments for the same period.
To go over the mortgage relief options available to you, please call their customer care on 132 032.
Why did Westpac stop lending to foreign investors?
Westpac specialised in lending to foreign citizens and Australians living overseas who were buying properties in Australia. In 2016 due to compliance concerns they stopped lending to foreign citizens living overseas, which caused many Chinese investors to be left high and dry when they needed to settle off the plan purchases.
They still lend to Australians living overseas however now their policy is much more conservative and they require extensive documents before they will approve a loan.
There are many existing customers of Westpac who are foreign investors unable to get a new loan with Westpac, if you’re in this situation then talk to a mortgage broker about other lenders that can assist.
What home loans types do they have?
Westpac’s Rocket Repay Home Loan and Rocket Repay Investment Loan are their two main loans. Combined with their Premier Advantage Package this gives a fully features home loan with an offset account and a great interest rate. It’s usually the best choice for larger loan sizes.
Westpac’s Flexi First Option Home Loan is a basic loan without an offset account. It’s normally only suitable for smaller loan sizes.
Westpac’s Equity Access Loan is a line of credit and is a little more expensive than their Rocket Repay Loan. For this reason it’s better just to get a Rocket Repay Loan as an offset account gives you the same effect as a line of credit anyway.
Their Fixed Rate Home Loans aren’t normally the lowest available so it pays to shop around. Under their professional package you can get a 0.2% discount for the life of the loan.
Their Low Doc Home Loan can be put in their Premier Advantage Package, but not quite with the same interest rate discounts. It’s still an ok deal, but we’d recommend shopping around as they are often better low doc loans available.
The Premium Bank
After the GFC, Westpac seemed to have taken advantage of the conditions and put their standard variable rate up above the other major banks and began calling themselves the Premium brand in the Westpac Group. Since most customers at that time wanted to be with a major bank, it didn’t seem to damage their market share like it normally would.
During that time we didn’t submit many applications to Westpac as we didn’t want our customers paying Premium interest rates for what appeared to us to be a normal service.
Tip for applying with Westpac
Use Westpac’s home loan information checklist to prepare for your home loan application.
Note: This is the latest home loan checklist as at November 2017. Please refer to Westpac for their most up-to-date document requirements.
Westpac expands list of acceptable guarantors
Westpac has expanded its list on who can be accepted as a guarantor for your home loan:
- Parents or step-parents or legal guardians
- Siblings or step-siblings
- Sons and daughters or step-children
They have also expanded the purpose of guarantees to allow for refinances and home improvements.
Westpac client story: Nathan, NSW
- To buy first home and qualify for a 90% home loan with waived Lenders Mortgage Insurance (LMI).
- Needed lender to accept actual income, not reduced income for tax purposes.
Dental researcher Nathan had been working as a self-employed contractor when he decided it was time to buy a place of his own.
He was earning a great income (around $180,000 per annum) and, with his 10% deposit, he was in a position to qualify for a reduced interest rate and a 90% LVR waived LMI home loan, a special policy exception that some of the major banks offer to professionals like dentists, veterinarians and doctors.
Nathan was actually renting a property where he was living and completing research so he was claiming his rent expenditure of around $35,000 per year as a tax deduction.
So effectively, his last 2 years tax returns were showing that he earned $150,000 rather than $185,000 which meant he wasn’t in a position to service or make the repayments on the $816,300 amount he needed to borrow.
After being provided with an accountant’s declaration explaining Nathan’s strategy to reduce his taxable income, Westpac was able to “add back” this rental spend as well as property depreciation of around $2,500 and one off expenses for replacement of tools at $21,500.
In the end, the bank assessed his income at around $185,000 instead of $150,000.
Nathan was able to get approved at 90% LVR, avoid the cost of LMI and buy his beach-front property at an interest rate of 4.08%.
Westpac no longer accepts 1-year financials
Westpac no longer accepts 1-year financials for self-employed borrowers; they will now require the last two year’s financials as a minimum.
When borrowing up to 80% of the property value (LVR), Westpac will take the average of the last two years’ income when assessing your borrowing power.
When borrowing more than 80% of the property value, they’ll use the lower of your last 2 years’ income.
So, if your self-employed income for the last two years were $50,000 and $100,000, respectively, and you were looking to borrow over 80% LVR, Westpac will take the lower of the two years which is $50,000, severely diminishing your borrowing power.
Compare Westpac to other lenders
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