Financing even harder now - almost impossible with new changes.

Discussion in 'Loans & Mortgage Brokers' started by Westnblue, 18th Apr, 2018.

Join Australia's most dynamic and respected property investment community
  1. Westnblue

    Westnblue Well-Known Member

    Joined:
    23rd May, 2017
    Posts:
    68
    Location:
    Brisbane
    Got this email from my broker today.

    As you are probably aware the lending landscape is changing rapidly, what was possible a month ago is now a struggle. One of the biggest issues we are facing right now is a new responsible lending requirement for property investors to fully disclose the ALL COSTS of maintaining their properties. This includes insurance, rates, water/sewerage, body corporate fees, maintenance etc. These costs are then to be taken into account IN ADDITION to HEM (the minimum living allowance) and all other costs when calculating the borrowing capacity for a client.

    In the past lenders have sesitised the rental to 80% to account for these costs however new ASIC guidelines require lender to sensitise rent to 80% to allow for "vacancies only" and require lenders to include all other costs in the calculation.

    This additional requirement is going to see about $5000/mth in expenses added to you borrowing capacity which is going to blow your servicing out of the water.

    This new requirement is creeping into all major lenders as we speak with the second and third tier lenders to follow shortly after. ​
     
  2. freddy

    freddy Well-Known Member

    Joined:
    17th Mar, 2017
    Posts:
    276
    Location:
    Sydney
    Should that be $5,000 a year not month?
     
  3. Westnblue

    Westnblue Well-Known Member

    Joined:
    23rd May, 2017
    Posts:
    68
    Location:
    Brisbane
    Monthly
     
  4. Peter_Tersteeg

    Peter_Tersteeg Mortgage Broker Business Member

    Joined:
    18th Jun, 2015
    Posts:
    8,130
    Location:
    03 9877 3000
    I don't believe I've seen any notification from any lender or ASIC about this.

    Living expenses are certainly under the microscope, but adding an extra $5k per month in expenses in addition to the 80% rule is going a bit overboard I suspect.

    Even if it were true, you'd need a huge portfolio to incur holding expenses of $5k per month. If your portfolio is that large and reasonably leveraged, you've probably got no serviceability for other reasons (that's speculative but accurate for most of my clients with large portfolios).

    To the best of my knowledge, this information isn't true and I can't see it happening to that extreme either.
     
    Last edited: 18th Apr, 2018
  5. Jess Peletier

    Jess Peletier Mortgage Broker & Finance Strategy, Aus Wide! Business Member

    Joined:
    18th Jun, 2015
    Posts:
    6,673
    Location:
    Perth WA + Buderim Qld
    That’s certainly not my experience. Very OTT.
     
    Perthguy and Terry_w like this.
  6. Westnblue

    Westnblue Well-Known Member

    Joined:
    23rd May, 2017
    Posts:
    68
    Location:
    Brisbane
    Seems like dont even want look at tax returns. I only had 2 properties in 2017 have vacancies for a total of 2 months each so definitely less than 20% expense.

    My Overall LVR IS 56% after recent valuations. And taxable NET income is in 6 figures.

    So after all expenses are shown in tax return and vacancies they wont take the net income either. All they want to do is have 20% for vacancy and include all costs which cuts $60k NET off my servicing income.

    Seems strange.
     
  7. Jess Peletier

    Jess Peletier Mortgage Broker & Finance Strategy, Aus Wide! Business Member

    Joined:
    18th Jun, 2015
    Posts:
    6,673
    Location:
    Perth WA + Buderim Qld
    Who is ‘they’?
     
    Glorion and Morgs like this.
  8. Rolf Latham

    Rolf Latham Inciteful (sic) Staff Member Business Plus Member

    Joined:
    14th Jun, 2015
    Posts:
    10,599
    Location:
    Gold Coast (Australia Wide)
    Suggest your .banker or broker is maybe misguided

    Ta
    Rolf
     
    jefn89 and Jess Peletier like this.
  9. Westnblue

    Westnblue Well-Known Member

    Joined:
    23rd May, 2017
    Posts:
    68
    Location:
    Brisbane
    whoever is in credit looking at your loan application
     
  10. Redom

    Redom Mortgage Broker Business Plus Member

    Joined:
    18th Jun, 2015
    Posts:
    4,607
    Location:
    Sydney (Australia Wide)
    Generality it’s true, not sure how they came up with the 5k p/m figure...that doesn’t sound right.

    Lenders are definitely doing more and lending is tighter as a result. Verification of info is noticeably more thorough from lenders in recent month(s).
     
  11. Jess Peletier

    Jess Peletier Mortgage Broker & Finance Strategy, Aus Wide! Business Member

    Joined:
    18th Jun, 2015
    Posts:
    6,673
    Location:
    Perth WA + Buderim Qld
    All in all what you've said is completely unlike anything I've experienced, with any lender.

    Change brokers?
     
    jefn89 likes this.
  12. Peter_Tersteeg

    Peter_Tersteeg Mortgage Broker Business Member

    Joined:
    18th Jun, 2015
    Posts:
    8,130
    Location:
    03 9877 3000
    I really can't see why they're giving you the explanation of $5000 per month in property holding expenses. Either:
    * They're doing a bad job of explaining what's happening and you're misinterpreting what they're trying to say.
    -or-
    * They're smoking something that's making them more paranoid than they need to be.

    If you're wanting to lend more money, you should probably get a second opinion. Hopefully you'll get a clearer explanation of the real situation because what you've indicated simply isn't making sense. :(
     
    luckyone and KayTea like this.
  13. Westnblue

    Westnblue Well-Known Member

    Joined:
    23rd May, 2017
    Posts:
    68
    Location:
    Brisbane
    Based on 2017 tax return there was $60k in expenses eg rates, water etc
     
  14. Jess Peletier

    Jess Peletier Mortgage Broker & Finance Strategy, Aus Wide! Business Member

    Joined:
    18th Jun, 2015
    Posts:
    6,673
    Location:
    Perth WA + Buderim Qld
    For 2 properties?? :eek: Are the loans included in that? Because clearly they shouldn't be.
     
  15. Phantom

    Phantom Well-Known Member

    Joined:
    23rd Jun, 2015
    Posts:
    2,054
    Location:
    Sydney
    I suspect there is some confusion or miscommunication here. Yes, the lending landscape has changed over the past couple of years and is continuing to evolve. HEMs have been the focus most recently and at the moment some lenders are requesting specific breakdowns of living expenses. Also, they are asking for evidence of other debts which wasn't required previously. So for sure, things are tightening, but not quite at that level described by you - or at least, not to my experience.
     
    jefn89 likes this.
  16. Westnblue

    Westnblue Well-Known Member

    Joined:
    23rd May, 2017
    Posts:
    68
    Location:
    Brisbane
    loans on top + $80 k pa. So total expenses $140k pa.

    More than 2 property.
     
  17. Jess Peletier

    Jess Peletier Mortgage Broker & Finance Strategy, Aus Wide! Business Member

    Joined:
    18th Jun, 2015
    Posts:
    6,673
    Location:
    Perth WA + Buderim Qld
    Go get a second opinion, it's the only way to find out if your broker is a weirdo or not.
     
  18. Westnblue

    Westnblue Well-Known Member

    Joined:
    23rd May, 2017
    Posts:
    68
    Location:
    Brisbane
    Yea im set up a few now. This is my 2nd broker that quit on me.

    Just need find one that likes the pain of doing large portfolios.
     
  19. sash

    sash Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    15,604
    Location:
    Sydney
    Nope....

    This is what I am hearing based on the changes at RAMs which is being brought in line with the parent Westpac:

    1. HEM as per APRA guidance
    2. Stronger compliance and easier to see the full committment of loans from 1 July due to the changes to credit reporting
    3. 80% rental still taken but only for vacancies (yes it is over the top)
    4. Factor in actual expenses for prooperty (about 5-6k....not 5k/mth that OTT)
    6. They will still assess on actual repayments
    7. Trust/Companies now will be subject to business lending and not resi anymore.

    So in short there will be pain...I feel...Sydney might be in for a very rough ride....
     
  20. Westnblue

    Westnblue Well-Known Member

    Joined:
    23rd May, 2017
    Posts:
    68
    Location:
    Brisbane
    Thanks for the info.
     

We provide our clients with the opportunity to select their own investments from a wide range of ASX listed securities. We provide the research to ensure your selections will achieve the goals. This is the value of advice.