Serviceability

I just wrote a Liberty loan for a client with 8 properties. 4.49% I/O

Wrote another Liberty loan for a client with 5 properties. Also 4.49% I/O

Perhaps its more than 4 loans with Liberty , rather than 4 properties in total - that attracts the loading? Have asked my BDM for a clarification.

 

is it your relationship/history with Liberty, or you give them enough business to get the 4.49%..
I think Pepper/Homeloan is on the same boat?...about 4.99% for the professional investor?

 

It's 4 in total that attracts the loading and includes OO too.

 

I don't think it's a terrible thing that lending is getting more cautious. If it helps to slow some of the unsustainable growth and leads to more incremental growth, then I see that as a positive. It makes sense to try to avoid the real estate explosions that did so much damage in other countries. In saying that, l have been surprised/frustrated that I've been getting some knockbacks for a loan for just my second IP, despite having reasonable income and strong savings record etc. (see my thread from a couple of days ago). But when it comes to 4+, I understand lenders being more cautious -- whether it's a result of enforced standards or not. I suppose it's not great for mortgage brokers, or at least makes it more challenging.

 

I recently got 4.14% for a client for their third IP at 70%.

Pricing depends on LVR, repayment type, purpose of funds and number of properties in the portfolio. The number of properties is the big cost, but if you can do it at 70% the rates start very low.

 

What are people's thoughts on the future of lending, will it ever become more relaxed again or is this the new norm?

 

This is the new norm.

I have been a broker for 15 years now and every year it just keeps getting tighter and tigher.

It was so easy to borrow money before - no lows, low docs, generous servicing calcs etc - The good old days per NCCP

 

Would it ever get to the stage @Terry_w if there are going to be less mortgage loans written up due to people maxing out alot earlier that some brokers may decide to calling it quits due to the gains being alot lower?

 

The regulatory changes being experienced are part of a series of changes being introduced as a result of global regulatory frameworks/recommendations. This is not just APRA and ASIC deciding to be tougher on Australian banks, in isolation. And its because of this that everyone needs to understand that this probably isn't the last of the changes, and they probably aren't temporary.

That doesnt mean this is forever, but it does mean for the next several years at least, this is the new normal.... but just like many other topics of discussion here , many forum members prefer to continue with their myopic view of things, believing otherwise in spite of overwhelming evidence to the contrary ... be careful to sort the wheat from the chaff, and see things as they actually are.

 

Rats! I was gunning for a McMansion and being a trophy husband one day with the other half bringing in the cash.

 

You can still have that if you understand the rules of the new game.

Improve income and reduce debt.

You just have to work out how to do those two things.

 

Sure - it is very hard for brokers to get clients at the best of times and now even if they can find the clients they often can't get them loans.

It would be a tought time to be starting out as a broker.

 

Since equity is much a dead money, maybe save up 120k and build a granny flat on your IP to increase income...?

 

let's not forget BASEL 4

http://www.theaustralian.com.au/bus...s/news-story/1bb5c3c0a72ce0f747555e7a5fb442c7

this is not the new norm, lending will get much tighter from here on till 2018 especially with interest rates looking to go up.

Most things have to revert to mean at some stage.

 

Pepper/Homeloans... what's their criteria for rates? I think their rate also 4.99% similar to Liberty.

 

Not quite. They're LVR based (rates go down as the LVR reduces). For a 95% loan you can pay as much as 5.24% but for an 80% loan I/O is 4.44%. Given what Westpac and NAB have done today, it's actually fairly reasonable and they're miles ahead on serviceability.

 

They charge for it, but one of the better calculators in above 80% space. 85% no LMI P/I option is useful too in plenty of cases.

 

I haven't checked with my broker yet. We're currently following her advice and paying down some debt and generally getting our finances in order before we make our next move. I have been running some numbers with interest rates between 7.25 & 8% P&I based on our current total borrowings and current rents at 80%, At these rates with our living expenses taken into consideration we are 'short' close to $2500 per month. Our circumstances will change in 2018 and we will have an increase of roughly this amount per month.

I know this may be a difficult question to answer but how then do we qualify to borrow more after paying down some debt? For arguments sake we pay down $80,000 in the next 12 months. Unless we earn more than what we can service at P&I with rents at 80% then aren't we still in the same position but with technically $80,000 more equity? Am I missing something?

 

With most lenders paying down $80k isn't really going to do much for you. The best case scenario is it will allow you to borrow $80k more. In some cases it will give you about $40k - $50k extra borrowing capacity. Most likely you'll have the worst case it does nothing to improve your borrowing capacity. It all depends on the lenders assessment policies.

You're probably better off saving the money to an offset account and putting in an extra $80k cash (instead of borrowing it). There are ways to debt recycle to make this tax effective.