Applications for Partial Release

Hello,

I have heard people mention some banks are asking financials/applications for partial releases of loans or security exchanges. Can anyone share any more light on this as given the recent changes to serviceability rules this could be very scary for some. Also if you are taking time off (or lose your job) and want to sell.

Cheers,

Smallbuyer

 

No one has had any issues when releasing or exchanging security? No requests for a new application or some financials?

 

Depends. I've heard of it happening but haven't had any client experience this. In the end - don't cross collateralise your loans and you won't be impacted by this for the most part with partial releases.

 

Yes always better not to cross. Unfortunately a lot of people still have crossed loans and need to deal with another nasty rule change.

 

Thanks for raising @smallbuyer - does sound a little unusual.

The partial releases on an x-coll loan setup relates the equity/deposit side of the equation, not the servicing/borrowing power part. Doesn't make too much sense to retest servicing, it really should be evident (by the fact repayments have been met through the loan period on the existing debt).

Which bank was this? Perhaps the request for financials may have been related to loan changes associated with the partial discharge (e.g. extending IO terms, etc on the remaining loan?).

 

Nothing i have experienced personally thankfully just something someone mentioned in passing which i though was concerning. If you arent asking for extra funds and banks start taking more and more opportunities to servicing checks that is concerning. Requests for longer IO periods make some sense as your repayment will be higher when you eventually start P&I but if they start doing a lot for other things it could be scary. What about if they do it for other things like moving into an investment property or out of your PPOR

 

The scenarios that I've known it to happen has been with retired individuals or self employed with significant changes (business sold and employed differently).

They've forced the borrowers to use sale proceeds to pay down other secured debt despite LVR being below 80%.

 

I had Bankwest request financials 6 months ago for 4 x properties (unencumbered) I moved elsewhere, in order to see if client could service the remaining debt for the 6 x properties we where not moving.

Remaining 6 properties with an LVR of only 50% as well. Was all x-coll but not by me, another broker.

Responsible lending gone mad.

 

I got a feeling they may want to check serviceability as we all know that the goal posts have changed and banks are in major "cover me ass" mode atm.

Will become common place I reckon until all the dust settles with APRA/ASIC interventions, perhaps permanent?

 

ING will do a new assessment if porting a loan, which is a similar thing. You can't just assume they won't, which is interesting given that there's no increase in lending.