Join Australia's most dynamic and respected property investment community

Serviceability

Discussion in 'Property Finance' started by Dylan33, 6th Sep, 2016.

  1. Dylan33

    Dylan33 Well-Known Member

    Joined:
    25th Jun, 2015
    Posts:
    85
    Location:
    Nsw
    Are there any lenders who are a bit softer on serviceability criterier than others, or are they all about the same? Also what is the general feeling for the near future regarding the regulations. Can you see it being tightened further or are they seeing results enough to consider a slackening off?
     
  2. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

    Joined:
    18th Jun, 2015
    Posts:
    8,937
    Location:
    Sydney
    All lenders are different. Some are more generous to certain client situations than others.

    I don't see it changing anytime soon
     
  3. Peter_Tersteeg

    Peter_Tersteeg Finance broker and strategist Business Member

    Joined:
    18th Jun, 2015
    Posts:
    2,090
    Location:
    Melbourne, Nationwide
    Lenders all tend to have different policies which can change serviceability dramatically across lenders. Peoples circumstances are also different so what works well for one person will work very differently for another. There's some general trends for broad borrower profiles, but get individual advice from a broker who understands property investment.

    Don't expect the APRA related regulations to get slacker in any significant manner. For a lot of technical reasons, I believe the thing that will give people the ability to afford more property in the long term will be interest rates going up, not down.
     
  4. Jess Peletier

    Jess Peletier Mortgage Broker - Australia Wide Business Member

    Joined:
    18th Jun, 2015
    Posts:
    2,756
    Location:
    Perth WA
    Generally speaking, lenders like NAB, Choicelend, and Liberty are the more generous lenders, but it does depend on your situation.

    I also don't see things getting made any easier, and it would not surprise me to see things get tighter in terms of living expense calculations.
     
  5. Steven Ryan

    Steven Ryan Mortgage Broker Business Plus Member

    Joined:
    18th Jun, 2015
    Posts:
    2,456
    Location:
    Sydney & Gold Coast
    As above, there's a fair spread in lender policy and therefore, how generous some are... not expecting major easing any time soon, specially with rates trending down.
     
  6. Balman

    Balman Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    118
    Location:
    Perth
    @Jess Peletier like you and many others have mentioned that smaller lenders like choice land, pepper liberty etc are more generous. However, I raised this with my broker who is insistent that the small lenders are intact harder to get any money from and have more loopholes to cross. Wonder why he is insisting we stay with big banks?
     
  7. Jess Peletier

    Jess Peletier Mortgage Broker - Australia Wide Business Member

    Joined:
    18th Jun, 2015
    Posts:
    2,756
    Location:
    Perth WA
    @Balman It depends - it might be due to LMI - Liberty does not have DUA for eg, so you also need to go to the insurer which can cause issues in some instances. Not an issue with NAB though.
    If you've got no obvious issues though, for eg no credit impairment, decent length employment and so on, it's usually not an issue.
     
    Balman likes this.
  8. Jamie Moore

    Jamie Moore MORTGAGE BROKER - AUSTRALIA WIDE Business Member

    Joined:
    18th Jun, 2015
    Posts:
    2,138
    Location:
    Canberra and Sydney
    There's some truth behind this.

    As Jess mentioned - some smaller lenders don't have the ability to sign off on LMI in house which means the LMI provider has final say regarding approval. If you're releasing equity or purchasing at a high LVR - this can be difficult.

    Having said that - not all LMI providers were created equal. For instance - I find QBE (in a very general sense) to be easier/better to deal with for investors then genworth.

    Cheers

    Jamie
     
    Balman likes this.
  9. Peter_Tersteeg

    Peter_Tersteeg Finance broker and strategist Business Member

    Joined:
    18th Jun, 2015
    Posts:
    2,090
    Location:
    Melbourne, Nationwide
    There's a lot of potential reasons for this, as Jess mentions, non-mainstream lenders are crippled if LMI is involved.

    There's also significant other risks as well. Liberty has recently increased rates in a manner that will likely affect investors with serviceability problems. Expect to pay over 5% on an 80% LVR investment. They get away with this because they know they effectively hold a monopoly in this market segment.

    Many small lenders such as credit unions are inherently conservative. They're not really after the investor market and their servicing policies reflect this, they always have. Mortgage managers tend to be subject to the policies of their funder of which ING and Advantage (owned by NAB) feature heavily. Sometimes this is useful, but purely on serviceability it probably isn't.

    The reality is that for the investor market, the big banks is where most of the action is.
     
    Last edited: 6th Sep, 2016
    Marty McDonald and Balman like this.
  10. Colin Rice

    Colin Rice Mortgage Broker Australia Wide Business Member

    Joined:
    9th Jul, 2015
    Posts:
    1,078
    Location:
    Perth
    Was speaking with my ME BDM and they have changed from Genworth to QBE for the reasons mentioned above.
     
  11. Simon Moore

    Simon Moore Mortgage Broker - Melbourne Business Member

    Joined:
    4th Mar, 2016
    Posts:
    220
    Location:
    Melbourne
    Word on the street is NAB/Advantedge are getting looked at very hard by APRA and the 30% repayment loading will be gone in a few months.
     
  12. Jess Peletier

    Jess Peletier Mortgage Broker - Australia Wide Business Member

    Joined:
    18th Jun, 2015
    Posts:
    2,756
    Location:
    Perth WA
    Nooooo!
     
    Terry_w likes this.
  13. Jamie Moore

    Jamie Moore MORTGAGE BROKER - AUSTRALIA WIDE Business Member

    Joined:
    18th Jun, 2015
    Posts:
    2,138
    Location:
    Canberra and Sydney
    Would be silly to remove it - the buffer they use is probably the most reasonable out of all lenders.

    A blanket 7% to 7.5% and P&I on existing debt is just crazy - especially in this current low rate environment. I understand the need for a buffer - but that's too extreme. I hope NAB don't follow the same path as the rest.

    Cheers

    Jamie
     
  14. Simon Moore

    Simon Moore Mortgage Broker - Melbourne Business Member

    Joined:
    4th Mar, 2016
    Posts:
    220
    Location:
    Melbourne
    NAB wants to keep it, it's APRA that has the problem!
     
    Colin Rice likes this.
  15. Rolf Latham

    Rolf Latham Inciteful (sic) Staff Member Business Plus Member

    Joined:
    14th Jun, 2015
    Posts:
    1,156
    Location:
    Gold Coast
    D
    ont forget that nab load the living expenses according to total income so for clients with higher levels of rental income the expenses are sometimes 4 times actual and often 2 x real

    Ta

    Rolf
     
    Colin Rice likes this.
  16. Peter_Tersteeg

    Peter_Tersteeg Finance broker and strategist Business Member

    Joined:
    18th Jun, 2015
    Posts:
    2,090
    Location:
    Melbourne, Nationwide
    Agreed. The NAB method of calculating living expenses is completely unrealistic. Not so much the amounts for a certain level of income, but how they calculate the income.

    Also keep in mind that APRA isn't dictating policy, rather they're instructing lenders to keep investment volumes at sustainable levels. They may express concerns about certain policies, but if various metrics are within the broad guidelines, APRA can't do anything.

    If APRA had their way, the Australian economy would be completely over regulated. Even with current levels of regulation, there will be a price to pay, although it could be a decade or more before we can look back and see it for what it was.
     
    Colin Rice likes this.
  17. Colin Rice

    Colin Rice Mortgage Broker Australia Wide Business Member

    Joined:
    9th Jul, 2015
    Posts:
    1,078
    Location:
    Perth
    Yep, with this type of regulation we will only know if it worked (or not) in a decade or so.

    We have APRA / ASIC putting the clampers on at one end and then RBA trying to stimulate at the other end.

    Personally I think it is "over the top" but hopefully Im wrong and they got it right.