Servicability issues.

This is more of a rant then anything. Ever since the govt tightened the lending regulations our servicability seriously sucks. As in it's basically non existant.
We aren't even servicable for the debt we do have anymore. And its not because we cannot afford to pay it. We can and do pay it. Its not because the household income is low. It's not.
Its because we have 5 children. And the banks have decided that the figure for each dependant is a rediculously amount, completely disregarding the fact that having five kids doesn't actually cost the same as having the one child and then just multiplying by five. Each child actually gets cheaper, because you already have everything they need. When you are already feeding 3 it doesn't actually cost much more to add two more mounts in there.

I am starting to feel like one of those first home buyers who thinks they will never be able to afford to buy a house. It doesn't help having equity if the banks all say you are unservicible and so you cannot access it.

Thinking I may need to take the cash we have saved to use as a deposit and go invest it in shares or something instead. Until I have enough to buy a new house outright. :/

 

I'm hearing you.

I can understand the need for regulation - and a lot of the changes were justified but there are certain elements that are just silly and lack logic.

 

It's a bugger. due to lots of factors when we got married we spent about 5 years without any capacity.


Commercial property finance and margin loans aren't affected yet by the apra changes of your set on getting more leverage.

 

Great time to buy shares at the moment even if you stick some on STW tomorrow at a 3 year low until you find something better should get a 5% dividend in a few months. I have sold 2 properties to access the equity and will put most the proceeds in to the share market.

 

Plenty of other asset classes you can invest in whilst resi property is targeted. CIP's, shares, businesses - heck even just looking at your options within SMSF.

Whilst it's a pain what the regulators have done to many perfectly sound investors, we have to make the most of what we can with the hand dealt.

 

One of mine was close to being adopted out..lucky for her she turned 18 in October

Double celebration

 

Many people are in the same boat - those with multiple properties already and/or multiple children. many could not qualify for what they have and cannot release equity.

 

What...? Hum, maybe I should be looking into commercial...

 

Yup which is important to consider if looking to sell and buy another, even at the same or lower price. The option to "redeploy" the money may not even be there. It'll be like playing a game of musical chairs except you have zero chance of sitting down again.

 

You'll still need 30% +/- but at least serviceability would be better.

 

Does mortgage insurance exist in the CIP world, and if so are the rates roughly comparable to resi?

 

No LMI. Though if you have equity in your resi property you may be able to use that instead of cash.

 

@jaybean You can also get landlords insurance on commercial through your broker (not that I know anyone who does).

 

I would've expected most banks to use things like Household Expenditure Measure for calculation rather than some arbitrary number then keep +1 for every extra number of depndents?

HEM: Melbourne Institute of Applied Economic and Social Research: The University of Melbourne

 

The flip side of more relaxed serviceability of Commercial is that lenders are not bound by the laws of APRA and can charge you for the valuation, (sometimes excessive) establishment/exit fees and P&I upfront as a consideration (although there are IO options out there for sure).

That's all after the 25% - 40% deposit dependent on the deal/location/property.

pinkboy

 

This makes me a bit mad. I love the idea of using statements to see actual expenditure, but it should work both ways. Good savers should be recognised as that.

 

Agree. I used to eat way too many two minute noodles to save a buck.

 

The changing rules have effected a few other people as well. Very normal in this climate.... Yes we all understand that the logic is not there but seriously there are allot of people out there with personal debt.

I have been building up a share portfolio as of late.