Mortgage Application Declined? What to Do When the Bank Says No | Episode 537
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Why does a bank say “no” to a mortgage application and what does it mean?
We are back in your life. And today, what do you do when the bank tells you no? Because a mortgage application that is declined does not necessarily mean you can't borrow, Michael.
Yeah, James, look, everyone wanted a bit more jargon. They loved the last episode, so I thought, what jargon do I know intimately? It is alternative lending. We're talking alt-doc, no-doc, low-doc, all of the alternative forms of funding.
And there's scenarios where people pay like a 10, 15, 17% interest rate and people would be like, why the hell would I ever choose that? But there are times where that makes sense.
Oh, 100%, yeah. Mizzy Finance, Caveat Lens, your local loan shark, you know. I do have one story about like a... 12th tier lender i guess um would you find him in an alleyway or basically and it kind of if you yeah if i gave you the headline numbers you'd be like this makes no sense at all but like no it made perfect sense for him right
because i mean the main thing is you might be in a situation where you go to a second tier lender or a 12th tier lender in an alleyway yeah uh and take a higher interest rate but as part of it you need to have a plan to get back to make main bank at the
end right strategy yeah We will talk a lot today about exit strategies. So the first kind of tier of lenders are your banks, right? They're your tier ones. They don't solve any problems for you. They create problems. You've got a mortgage from a bank, James? I think I have, Michael. So easy, wasn't it? Yeah, no, it was not. Yeah, exactly, right? And look, I love my friends at the banks, but they have a lot of rules that they have to deal with to be able to give you the money. The big one is the triple CFA regulation. Credit, consumer, contracts, finance, something like that. Do make up your C's and your F's, you'll be fine. What it actually meant for the bank is that they were personally liable, like the head of the bank was personally liable for someone writing bad loans.
So what that meant was credit just froze basically, right? And the big things there were they had to prove that one, the purpose of the lending was reasonable. Two, you could afford it. And three, they weren't going to put you in an adverse financial situation by giving you a mountain of debt. Now, those things are very tricky to try and hit for a normal loan just to prove these things, right? How am I going to tell you someone that I'm not putting you in an adverse financial situation by giving you $1.2 million of debt, right?
Yeah.
That line is blurry, no matter how much you earn, basically. And then if you've got someone at the top of the bank, some C-suite executive who's like, whoa, whoa, whoa, I was just doing this job to cruise on out to retirement. What do you mean I'm now personally responsible for this? It can make things very tricky, right, to give out money.
Probably the same reason when health and safety regulation got introduced and we stopped getting Friday drinks
when
we were at the bank, right? It's because of the liability.
I think that was... I don't think it was to do with... Well, one of us was throwing sausage rolls off the top floor of a balcony. No, they
were
sausages. Sorry, one of us was throwing sausages off the top floor of a balcony at a bank party once and it wasn't me.
I just thought, you
know, a few drinks deep, there was a
fountain down the bottom and I thought I could...
plug the fountain
with the sausage let's move on actually one other thing probably to touch on with that does make me think about the time we were at a quiz night and we went out ditched our team went outside drinking on the balcony the whole night rolled back and at the end of the quiz went straight to the stage for the victory and
they
were like you guys were on our team and we were like give us the free stuff
We literally walked up on stage, got the trophy, got the photo, gave the trophy, and then went back outside onto the balcony to keep drinking. Throw more sausages. Yeah. That's not a euphemism. It's not. It's actually not. So, you know, there are a ton of reasons why a bank would say no to you, right?
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Chapters
7 chapters
1
Why does a bank say “no” to a mortgage application and what does it mean?
0:00–4:53
2
What are tier‑1, tier‑1.5 and second‑tier lenders and how do they differ?
4:53–8:46
3
When and why would a borrower use an alternative‑doc (alt‑doc) loan?
8:46–11:32
4
How do specialist lenders assess income without traditional pay slips?
11:32–15:30
5
What is a no‑doc loan and how does the lender secure the loan?
15:30–19:06
6
What exit‑strategy should be in place for short‑term or high‑interest loans?
19:06–22:32
7
How can a mezzanine or caveat loan help property developers in a pinch?
22:32–24:32
Speakers
1 identifiedMore from Cheques and Balances
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