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Responsible Lending - what it actually means


Roisin Broderick, Digital Content Specialist, Keystart

3 min 30 sec

If you’ve ever eaten too much at dinner or pushed yourself too hard in a workout, you’ll understand the feeling of being overwhelmed. It’s a moment filled with regret, angst and a touch of fear, often described as “biting off more than you can chew”. In the world of finances and mortgages, it’s a feeling that’s all too common. Singles, couples and families jump head first into a mortgage that can then dictate every aspect of their lives.

At Keystart, our aim isn’t just to help you achieve your dream of owning your own home. It’s also strongly based around ensuring you achieve a level of financial comfort where you can enjoy other aspects of your life, and comfortably meet your mortgage repayments. This is where our focus on Responsible Lending comes in. Responsible lending is a legal requirement for lenders that mandates that significant effort is made to ensure a home loan is actually a good option for you, because in some cases it simply isn’t.

The obligations of responsible lending include:

  • Make reasonable enquiries and take reasonable steps to verify the consumer’s financial situation, requirements and objectives
  • Assess the consumer’s suitability for credit; and
  • Provide the consumer with a credit guide.

Assessing your financial situation

Choosing to take on a mortgage is one of the biggest decisions of your life. It’s not a decision that we take lightly. To ensure that now is a good time for you to begin your journey to home ownership, we ask an extensive range of questions. We want to know everything about your financial situation, your occupation or career prospects, as well as living circumstances and personal details like your family arrangement. We also need to know if you are aware of any potential future changes to your situation, such as a change in overtime schedule or loss of allowance. The questions are designed to make sure that you have a strong foundation from which we can build your dream of owning your own home. This will involve you giving us a lot of evidence to support your application, but that just helps us make the best decision for you, and while it can feel overwhelming, we’re there to support you all the way.

Assessing your suitability

There’s no point in getting to live in the home of your dreams if you’re going to spend every waking moment worrying about where the next mortgage repayment will come from, or if you’ll be able to put food on the table. It’s our goal to make this an exciting moment in your life, not a stressful one. We will make an assessment as to whether you can meet your financial obligations and that our product meets your requirements.

Providing a credit guide

Once it is apparent that your application for credit will be approved, lenders are required to provide a consumer with a credit guide. A credit guide will contain information about the lender, their products and contact information if you have any concerns.

On our side of the fence, there’s a lot of complicated legislation, partnered with a strict set of rules around responsible lending. We don’t see it as a hindrance or an unnecessary step. Instead, it’s a process that allows us to make sure your loan is affordable and you are happy in your home without added stress.

For more information, visit the MoneySmart website

Keystart recommends that you seek your own independent financial advice prior to making any decisions about your financial needs. Any examples given in this post are provided for illustrative purposes only.

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