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St George SMSF 70% LVR

Discussion in 'Property Finance' started by Shahin_Afarin, 20th Jul, 2015.

  1. Shahin_Afarin

    Shahin_Afarin Residential and Commercial Broker Business Member

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    Effective tomorrow St George will reduce their SMSF LVR from 80% to 70% - this is on the back of them requiring 10% surplus after purchase.

    St George have been our main lender of choice due to their offset feature - these changes are going to be make them far less competitive...... unless other lenders follow suit.
     
  2. Redwood

    Redwood Well-Known Member

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    Interesting times isn't it, there are still a few lenders at 80%. Not sure why they didn't make the change a few weeks ago when they implemented the 10% liquidity requirement.

    Lets see what AMP does?

    Options are becoming limited in the SMSF market, the biggest attraction of St George is the offset feature however the lower LVR will cause a problem for some.

    Luckily I submitted two loans on Friday with them that require the 80% LVR.


    Cheers Ivan
     
  3. Coota9

    Coota9 Well-Known Member Premium Member

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    Ivan,

    With the bigger cash deposit now required(70%LVR)does this make the purchase better in terms of cash flow therefor making an offset function more critical to park excess funds for future purchases?
     
  4. Greyghost

    Greyghost Well-Known Member

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    I
    The 10% surplus.
    Is this liquid assets?
    10% of the property value?
     
  5. Redwood

    Redwood Well-Known Member

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    Coota -

    Really depends, offset is a great feature particularly with 'switched' on investors with cash reserves, and benefits the investor in the long term (i.e.30 years). Your investment strategy should always be to grow cash reserves and let the property rental income cover the debt in my view. Will be interested how AMP react now as they also have the offset feature.

    The cash outlay is dependent on your strategy and risk profile. La Trobe for example reduced their LVR to 70% 6 months ago - with a premium rate for 75% LVR, this was due to the off the plan issues being experienced in the market. Cash planning is needed upfront to determine your buffer, and I have no issue with a 10% liquidity requirement as I have seen many investors wiped out at settlement due to low valuations and inadequate planning (usually sold rubbish by spruikers).

    Grey ghost - liquid assets of the fund at settlement of the property.

    Cheers, Ivan
     
  6. Shahin_Afarin

    Shahin_Afarin Residential and Commercial Broker Business Member

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    The point is being missed - St George does offer a St George but so to the Rock and AMP.

    The big issue is that St George is the only 'decent' lender that can factor in additional contributions as part of servicing. Mac (to an extend) and AMP cannot unless you have proven additional contribution history.

    This is the big difference and this is why St George were so competitive.
     
  7. TheSackedWiggle

    TheSackedWiggle Well-Known Member

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  8. TheSackedWiggle

    TheSackedWiggle Well-Known Member

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    Hi Shahin,



    Does this Apra move mean banks have to raise capital (ie share dilution)? or LVR tightening?
     
    Last edited: 20th Jul, 2015
  9. Shahin_Afarin

    Shahin_Afarin Residential and Commercial Broker Business Member

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    APRA has already requested an increase in the capital that lenders hold.

    Some of the specific lender changes are due to other factors - for example, Westpac made some significant policy changes recently for their non resident and investment lending. This was due to the fact that it was carrying a huge amounts of these types of clients.

    Now they are coming out with incredible deals for owner occupied loans in order to balance their books (like 85% no LMI and $1,500 cashback for PPOR Refi's).

    These changes are just the beginning - I dare say there may be a close correlation between rates dropping and lending tightening. IMO we wont see lending easing until 2018.

    Like anything that experiences a shake up - some will not complain and find opportunities and some will experience significant pain from the changes duet their inability to adapt.
     
  10. TheSackedWiggle

    TheSackedWiggle Well-Known Member

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    Is increased rental vacancy rate a result of new supply hitting along with an Ease of PPOR lending along with ATL rates resulting in many renters tobe home owners?

    How will continued LVR/Servicability tightening play out in terms of property prices going ahead? especially in tightening period.
     
  11. Shahin_Afarin

    Shahin_Afarin Residential and Commercial Broker Business Member

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    Yeah for sure - with money being so cheap it just makes sense for people to buy which is what is happening in Brisbane.

    Predicting future property prices is crystal ball stuff - I guess the question is what to you do when most of the oz markets stabilise or flat line in the upcoming years. A lot of people have been banking on crazy growth but I think its time to start looking at alternative strategies.
     
  12. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    I just got a 2nd alert. It seems even those with pre-approvals are not going to get 80% LVR now if any part of their circumstances change.
     
  13. sanj

    sanj Well-Known Member

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    what sort of LVRs are available for SMSFs for good quality commercial properties in the $3-5m range?
     
  14. Shahin_Afarin

    Shahin_Afarin Residential and Commercial Broker Business Member

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    What type of commercial property are we talking about and whats the purpose?

    If its a stock standard deal then you could go up to 70% and if its a specialised professional then you could go higher - e.g a medico running their own practice can go 95%.
     
  15. sanj

    sanj Well-Known Member

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    would be office or industrial, if industrial probbaly a higher purchase price. purpose is solely to rent out, not to occupy.

    it's for a relative who is over 60, buying a decent yielding commercial property in SMSF just makes sense imo but it's still early stages in my research

    plan is to only get say 40 or 50% LVR but would still like to know max
     
  16. Shahin_Afarin

    Shahin_Afarin Residential and Commercial Broker Business Member

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    The big issue is that the property MUST have a lease in place unless they are able to service the debt without the use of the rental income.

    Age is also an obvious issue - LVR would be the least of your problems.
     
  17. sanj

    sanj Well-Known Member

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    im not too concerned about age, there's a fair bit of residual income from businesses, dividends etc. obviously it's an issue but they just got a sizeable home loan without too many problems so im sure it can be overcome

    so having a lease is non negotiable in your experience?
     
  18. mja

    mja Well-Known Member

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    So apart from AMP, what other lenders are in this space @ 80% LVR?
     
  19. Shahin_Afarin

    Shahin_Afarin Residential and Commercial Broker Business Member

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    Assume we are talking resi security - Homeloans still do 80% as well.

    If you want a cheap lender then Macquarie is excellent (although they have a 10% liquidity policy). They can be flexible on policy particularly servicing. Homeloans is cheaper than Macquarie on rate but I would prefer Macquarie in tight scenarios.

    If you need an offset (and most cases you do) then AMP is your best bet and the lender that is getting most of our business right now.
     
  20. mja

    mja Well-Known Member

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