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Bank to reject HomeBuilder-dependent applications

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Reporter 5 minute read

A non-major lender has informed brokers that it would not accept loan applications from borrowers relying on the HomeBuilder grant to fund a project.

Adelaide Bank has outlined its stance on HomeBuilder grants for mortgage applications, telling brokers that, until further notice, it would not consider applications for its Connective Select white label product from borrowers depending on the federal government’s $25,000 HomeBuilder grant to complete a renovation or construction project.

The lender added that if the HomeBuilder grant has been disclosed but will not form part of the funds needed to complete a project, then conditional or formal approval would exclude considerations of the $25,000 grant.

Adelaide Bank told brokers that customers relying on the grant should consider “alternative providers that are willing to offer a conditional approval on the build” to support the land loan.

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“Once all the states and territories have advised how they will administer the grant, the bank will then consider and work on an appropriate policy and process to support these applications and will naturally advise accordingly,” the bank added.

“We cannot provide a timeline at this stage.”

The HomeBuilder program, which was announced last month, will be available to owner-occupiers “substantially renovating” or building a new home from 4 June to 31 December 2020.

The grants are subject to eligibility criteria, with a national price cap of $750,000 set for new home builds, and a renovation price range of $150,000 to $750,000 to apply for renovations of an existing home with a current value of no more than $1.5 million.

Brokers have been awaiting clarification on how lenders will be treating the grant since it was announced by government last month.

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Early access to super treatment

Similarly, Adelaide Bank has also outlined that, early release of superannuation accessed via the government's COVID-19 early release initiative will also not be acceptable as equity to a lending transaction.

"While there is no requirement for lenders/partners to look for any evidence that equity is from COVID-19 early release of super, if the bank is aware of this arrangement, the funds cannot be accepted as equity/genuine savings," it said.

"At no point can applicants use funds from their superannuation. If questioned, this needs to be advised as not acceptable. If at any point it has been disclosed that funds released early from the applicant(s) superannuation, then this portion of funds cannot be used to make up the settlement shortfall.

"Applicants reliant on these funds to cover any settlement shortfall (i.e. have no other way to cover the settlement shortfall), will be declined." it stated.

The early super release scheme enables retrenched workers and those whose working hours have been reduced by 20 per cent or more to access up to $20,000 of their super.

The first $10,000 has been made available from 20 April until 30 June 2020, with a further $10,000 available between 1 July and 24 September 2020.

[Related: Adelaide Bank lowers floor rate]

Bank to reject HomeBuilder-dependent applications
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