A few months ago I posted information about how investors can utilise finance strategies to really stretch out their borrowing capacity and grow large investment portfolios with average salaries (see SS thread: http://somersoft.com/forums/showthread.php?t=106722),. Since then, APRA have come down with their heavy stick and directly targeted this approach. They’ve effectively made the majority of lenders reduce the amount they’ll lend to investors. Its been talked about a lot through these forums, but the main way they’ve changed the game is: Previously certain lenders (NAB, Macq, AMP, ME, etc.) took the actual repayment (say 4.5%) you paid on your mortgages with other banks into their calculator. They now apply substantial buffers on top of those actual repayments into their borrowing calculator. In my last thread I talked about how to use this to investors advantage as one of the key principles to grow portfolios. Getting certain lenders to apply higher buffers on debts you have with them. Applying higher interest rates to investors. And more recently, applying LVR restrictions on investors. The majority of these changes have a direct and tangible impact on investors borrowing power. With the dust now settling on these changes, where does this leave investors looking to grow their portfolios? The good news is that today it is certainly still possible to grow large portfolios on average incomes. In short, you can still apply the same strategies I mentioned in my original post, but now you’ll need to go to new lenders (non APRA regulated lenders). It may be harder, there may be refinances involved and the costs of doing business may have increased marginally, but it is still possible to stretch that borrowing wall out into the distance. The solutions of yesterday may not apply to today’s problems. It just means that it’s our job to find investors new solutions (sorry APRA!). There’s a silver lining to all of this too. Most of the new lenders that investors can now go to, they would never have thought of going to before. That means there are viable options where you can go to a new lender and have ALL of your existing mortgage debt treated at the actual repayment you pay. So long as your yields are reasonable (20% above the interest rate you pay), you’ll have your borrowing power effectively refreshed to when you had no mortgages. For example, if you have $2million in debt with one of the previous actual repayment lenders, they and MOST lenders will take that debt at a considerably higher assessed buffer. E.g. Macquarie, one of the investment leaders of the past, would take ~$159,000 in your yearly repayment. The new lender will take that same repayment at ~$90,000. That equivalent to reducing your expenses by ~$70,000 a year (or increasing your income by over $100,000 p.a.!) By switching to a non-APRA regulated lender, this calculation difference can make a massive difference to your borrowing power and allow you to keep purchasing. In summary, if you’ve believe you can no longer borrow because of the APRA changes, you are likely to still have options.