Serviceability

Hey Guys,


Would like to get a 2nd, 3rd, 4th opinion from some of the experienced brokers here.

I have a very good broker who has helped me purchase my 2nd and 3rd properties.

I do trust her and have known her for years.

Now I’m going for the 4th property and it seems serviceability is becoming an issue.

Im being told that all lenders are assessing investors existing and future borrowings at min 7.25%

And P & I as well even though all my loans are Interest only. Lender also only takes into account 80% of rental income.

As a result only Liberty Financial can help me and give me what I want (about $500k total) but at rates almost 0.75-1% higher than everyone else

I don’t have any bad loans or car loans or massive credit cards and equity is not an issue. No defaults etc. No current or future loan will be above 80% LVR.

I work fulltime $110K, my wife works part time $25K and All properties have tenants in them.


Are all you brokers fighting the same battle? Any other lenders who are more lenient with assessment with better interest rates??


Thank you in Advance!
Christian

 

Have you tried NAB/Advantedge/Choicelend? For the moment they're still quite good, but won't be in a few weeks.

This is the new reality though - the total amount of lending available to each person is substantially lower than it was 18 months ago, and it's about to get even harder when NAB change next month.

 

Sorry @Christian but this is the new reality. Mainstream lenders have been forced to have increasingly conservative lending policies over the last 18 months. Building a portfolio of multiple properties is not as easy as it once was.

There are lenders outside of the mainstream that have not been affected, Liberty is the most well known lender in this regard and they have increased their rates for customers of your profile to reflect their near-monopoly in this space. There are lenders that are more generous than the mainstream, more than just Liberty. They all tend to come at a price however.

It is what it is. These days with a good income you can buy your own home and perhaps an IP or two via traditional lenders. Beyond a certain point you're going to have to rationalize cheap rates take a back seat to actually being able to borrow the money at all.

 

I'm surprised your broker is still able to get you funds for your fourth!

It's a new world out there. If you want the money - be prepared to pay for it. Lenders like Liberty know they can charge a premium for their offering.

Cheers

Jamie

 

I suppose the 4th has to be a very good buy to use Liberty. How much more must @Christian earn to get loans from the mainstream? Another 40k?

 

Depends on the overall position but sometimes as little as 10k can make the difference.

In this post APRA/ASIC environment we are all facing the issue of serviceability. It was rare not to be able to place a deal previously but now its a once a week event.

 

Thanks for all your help and comments guys. Looks like all the brokers and the clients are in the same boat! I guess it means my 4th purchase will be the last one for a while?!

 

Depends what you buy, and what you've got in your portfolio.

 

Wise words in this thread. The shift in lending for investors is moving to the point where you will need to accept that there is a significant price gap between owner occupied low risk lending and the perceived higher risk lending that investors represent.

The flow of importance for any loan selection is:

Capability to get the loan > Ancilliary Policy (cash out, interest only renewals etc) and Features (offset accounts, fixed rates, IO terms) > Interest Rate

For a long while now investors have gotten a little bit comfortable in being able to only worry about the lowest order of importance factor, in many cases to the detriment of the other areas. With the lender and policy diversity shortening this means investors will need to take a more rational approach to investment lending.

Just like any business there are costs, we mitigate them where possible, but it doesn't mean you shut up shop and go home the moment you get a higher bill from your supplier.

 

Welcome to the way it is in October 2016.

November will be even tighter

 

@Christian if it's any consolation we are in the same boat. Went to get an equity release for our 5th and we are not meeting the serviceability criteria for a $300K loan and can't get $70k equity out. We are now going to be heads down and tails up chipping away at some debt until things look brighter.

 

Not cross coll i hope? Would rearranging lenders help at all?

 

@Magnet I can get finance from Liberty albeit at higher interest rates. They are monopolizing this market. I thought about not taking the finance at all, but then there is opportunity cost of not getting growth on an asset. So I think I will pay a premium now and refinance later when lending criteria is less stringent.

 

Nope, not crossed. We currently have St George and Macquarie. I think the main issue is that we now have close to 1.25 mill in debt and don't earn enough to push forward at this point. End of 2017 we will get rid of vehicle novated leases and all kids in School beginning of 2018. So I guess we will be sitting it out for a while. What am I going to do with my property addiction? May have to start spotting for other

 

@Christian I haven't specifically asked but I'm guessing even Liberty won't have us

 

They're usually fine as long as under 80% LVR

 

People of the forums talk about Liberty a lot, don't forget Latrobe 4.49% Investment 1.25% upfront special going at the moment!

0.3% loading for interest only.

 

My latest purchase, my broker used Liberty and the rates was sucky but the way I see it, it's a short term pain for a long term gain. I am confident with the quality of the purchase and the future of this property.

 

They probably will - they are MUCH more generous than pretty much every other lender.

 

Thanks for explaining @Peter_Tersteeg it all makes sense now. @Jess Peletier i will ring my broker back and ask about Liberty.