Purchasing a home is a major financial decision, so it’s important to understand the rules and regulations that exist to protect your investment.
By learning who regulates mortgage lenders and how lender regulations work, you can enhance your understanding of the mortgage industry and discover how to access the best financial outcomes. This can help you pay a fair price to live in the home of your dreams.
So who regulates mortgage lenders, and what do you need to be aware of? Here is everything you need to know.
ASIC regulations
In Australia, mortgage lenders and brokers are regulated by the Australian Securities and Investments Commission (ASIC).
This federal government body is responsible for licensing brokers and lenders. This means only lenders who comply with Australian mortgage law can practise legally.
What are the regulations?
Australian mortgage lenders are required to with responsible lending conduct obligations, as stipulated by the National Consumer Credit Protection Act 2009.
These requirements outline that lenders must only enter into credit contracts that are suitable for the consumer and their financial means.
Compliant lenders must make reasonable inquiries to understand your financial situation, including regular income and expenses, as well as your purchasing goals and any other important information.
Your lender must take the required steps to verify your ability to repay your loan, and they must determine that the credit contract they are offering is suitable for your needs and your situation.
If you request it, a licensed lender is also required to provide you with a copy of the preliminary or final assessment on your credit contract’s suitability.
How to verify your lender
When purchasing a property, it’s important that you verify the legal compliance of your lender. This can help you avoid a lending problem that could end up costing you stress and money.
The key to verifying your lender’s compliance is looking for an indication ASIC licensing. Most major lenders should display this somewhere on their website.
Don’t be afraid to ask questions. A lender who complies with all relevant legal requirements will be happy to provide evidence of this if requested. This can put your mind at ease and help you borrow with greater confidence.
Why it’s important to work with a licensed lender
Working with a licensed lender is essential if you want to protect your finances while getting the best possible value for your money.
Your mortgage lender will assess your borrowing power, and if they comply with government regulations, they will offer you a loan that aligns with your financial capacity. This means you are less likely to default on your loan and risk losing your property.
Applying for a loan from a regulated lender also means that you can trust the advice you receive. You’ll be provided with accurate, up-to-date information that you can use to make informed financial decisions.
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