ME Bank..serviceability

Hi all. Have an IO investor loan with ME which we took out back in '15 (ie 1yr IO left to go). Also have a 2nd IO investor loan, as well as PPOR loan. All up, about $2.7m worth.

LVR on the ME secured property is ~70%, but as with many investors with multiple properties, we're concerned about the impact of current responsible lending servicing calcs.

Refinancing away from ME prob isn't an option, as the current fixed rate locks us in 1yr past the IO expiry (I know, I know..but we thought at the time we had sufficient servicing buffer and took for granted the ability to get another year's IO at least, no ifs or buts).

So..whilst ME was pretty generous at the time, but we understand that will likely have changed.

Would be interested to hear from any brokers with experience of ME as to how tough they've become lately? Have heard worrying things..

The way I see it, if we can't get another year of IO, we either go P+I (fairly brutal on a $800k bal over 25 yrs) or potentially break the fixed rate in its final year which will likely incur a few $k.

 

They are Not very generous in the serviceability area

 

Unsure, given BBSW likely to jump about between then and now...but my best guess is anything from $2-5k when the time comes (ie not great..unless you go someplace offering cash upfront to refi like Westpac does).

I'd be particularly interested in understanding how many months of bank statements they pore over..(3 or 6?)

 

At this point they don't appear to be asking for transaction statements to verify living expenses. They do want 6 months statements for the loan they're refinancing, which is fairly standard.

My information on this could be out of date. I rarely even consider ME banks because their serviceability is terrible, their rates, products & policies aren't anything to get excited about.

 

Thanks Peter, suspected as much..

Given I may be a captive audience of ME however, it'd be good to understand what elements of their current servicing fall short relative to others?

..Btw, I have a reasonably 'vanilla' income stream (PAYG for myself, wife..though wife gets fairly healthy bonuses on top), plus the rentals from the two investment props. All-in, should come inside of 7x (maybe 6.5x).

Maybe ME are trying to drive down their investor back-book if APRA thinks it represents too high a % (they used to market a fair bit to investors when we first went with them).

 

I write a fair bit with ME due to their flexibility on payg income types and length of employment. They're better than most with use of bonus income. And the fact they don't require statements for living expenses - although they are asking for them now in some instances post-application which is frustrating.

I've done a couple of investment loans with them but mostly O/O as their rates aren't anything special. I'd say they are just above the middle of the range in terms of investment loan serviceability.

The majority of standard lenders aren't great for serviceability so depending on the strength of yoir numbers you may have to go non conforming to stay I/O. There is talk that lenders are going to relax a bit on servicing but that's still a bit of crystal balling at the moment.

 

Great, thanks for this Beachgurl.

Whilst I have a little time on my side, I planned to use this to understand ME's policies (hopefully current ones are about as tight as they get!) and if needed, "sanitize" my living expenses in my income accounts - I think presently, I will be about $3k over each month based on P+I over residual term @ 7.25%.

Dunno if you're able to share, but is there any way to obtain/access the ME servicing calculator provided to brokers?

Be good to look at income shading (bonuses, rental) and neg gearing allowance.

Cheers!

 

a) become a broker and get accredited with ME, or
b) ask a broker (not me)

 

Fair enough..but realistically, a broker isn't going to want to help me with a short-term (12m) refi of an existing loan I'd have thought.

..However, would obviously consider subsequently working with a broker who was helpful with getting me over this speed hump.

 

A broker would be fine with a potential short term refi if you're ok to pay their clawback when you exit the loan.

With regard to shading of bonus, if the figure is identical to last year there's no shading. A few other lenders are the same but a lot do shade.

 

Hey all. Anybody dealing with ME who knows if they've revisited their assessment rates in light of APRA?

 

Haven't heard anything - if you're 'stuck' with ME why don't you call and ask them to assess your serviceability?
Otherwise find out how much their break costs are for your fixed rate and switch lenders? Plenty of better alternatives out there at the moment.

 

Cheers LW. Have done my own detailed assessment over 13 expense categories, which comes up well short at 7.25% P+I.

I can make enough living expense savings if I have to in order to clear the hurdle, but obviously it's preferable if the assessment rate came down to 6.75 or even 6.50%. I wondered about ME, as they never disclose much to the punter (believe me, have rang up and asked only to be told "our credit assessment criteria are not public"), hence was looking for a bit of inside track.

Given loan size ($780k) and rate (fixed 4.19%), I daresay break costs would be fairly brutal with over 12 months to go.

 

Thanks Peter.

Ouch!

Higher of 7.25% or 2.20%!! Must be trying to kiss APRA's backside!

..brutal. Wonder how much business these guys want to write? As prev poster said, their rates look v ordinary.

 

Truth is I haven't played with ME's calculator in a long time. The policy document is the only one I can find and isn't very recent, so it doesn't include APRA's recent assessment rate review.

 

No worries Peter - I managed to make it work! Gives a reasonably good idea of my target monthly living expenses, so that's useful info for time being.

 

Follow-up to previous...called ME to see if they're divulge if they're now using +2.5% buffer over actual rate (I'm investor IO, 4.19% 3yr fixed)..surprise surprise, "we can't tell you" (!)

..Anyone know if they've moved from 7.25% servicing buffer to 2.5%?

TIA.