When will servicibility improve

Discussion in 'Loans & Mortgage Brokers' started by shorty, 3rd Jul, 2020.

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  1. shorty

    shorty Well-Known Member

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    Like many, I have loans that I previously serviced for, can easily service now but am nowhere near meeting current servicibility policies with mainstream lenders for refinancing.

    Any predictions about when servicibility might relax a little?
     
    shorty, 3rd Jul, 2020
    #1
  2. Property Twins

    Property Twins Mortgage Brokers & Buyers Agents Business Member

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    Hi!
    When did you take out your loans? Which lenders?
    Servicing has already relaxed... with some lenders lowering assessment rates twice over the last 12 months. One of the other things impacting would be living expenses.
     
    Property Twins, 3rd Jul, 2020
    #2
  3. shorty

    shorty Well-Known Member

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    2017 with a second tier lender.
     
    shorty, 3rd Jul, 2020
    #3
  4. Archaon

    Archaon Well-Known Member

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    when your income increases?
     
    Archaon, 3rd Jul, 2020
    #4
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  5. Rolf Latham

    Rolf Latham Inciteful (sic) Staff Member Business Plus Member

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    I dont think APRA will touch this any further than they have.

    The have pretty much given free reign to the lenders to set their own floor or assessment rates.

    While actual rates have reduced by a LOT in the last few years, assement rates for IP loans havent kept pace.at most lenders.

    This means that for investors, their actual borrow cap hasnt increased much at all, because while floor rates have come down, the neg gearing with most lenders is at the actual rate.

    This hurts middle to high income earners the most

    Further, HEMS have increased substantially even though CPI has been sub 3 % for a loooooooomg time.

    PPOR only servicing has increased by a a lot more than investors due to floor rates coming down by approx 20 %, but its nowhere near 20 % increase in Borrow cap due to Hems as above, and credit card limits being treated a lot more harshly with a near 30 % increase in deemed repayments.

    ta
    rolf
     
    Rolf Latham, 4th Jul, 2020
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  6. euro73

    euro73 Well-Known Member Business Member

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    Quick fixes =
    Get a huge payrise- and I mean huge. You need at least 50-60K extra per million borrowed to see any real improvement in borrowing capacity, because of all the things @Rolf Latham has explained above.

    Inherit money and pay down debt.

    Win lottery and pay down debt .

    Slower fix=

    buy assets with much stronger cash flow so you can either use the surpluses to reduce non income reducing, non deductible debt and eventually debt recycle, or pay P&I and pay down INV debt and eventually debt recycle

    Things that do not really help =

    capital growth.... unless you are happy to sell , take the post CGT profits , reduce some debt and start over with cheaper properties producing far greater yields ie - refer to "slower fix" . Growth is lovely for the balance sheet and it's very welcome of course, but the other spreadsheet that matters , a servicing calculator... not so much
     
    Last edited: 4th Jul, 2020
    euro73, 4th Jul, 2020
    #6
  7. shorty

    shorty Well-Known Member

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    Thanks Rolf and Euro - exactly the info I was after.

    I don't want to borrow more, just refinance my existing loans (for structure reasons) but seem to be stuck due to the tightening up of servicibility policies. I'm about to start up a side hustle, I guess more income is the only way to go.
     
    shorty, 4th Jul, 2020
    #7
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  8. Blueshoes99

    Blueshoes99 Well-Known Member

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    Go to tier 2/3 lenders and you should be able to service more. The banks r struggling with getting new customers so this is why there has been so many $$$ incentives
     
    Blueshoes99, 4th Jul, 2020
    #8
  9. BandM

    BandM Member

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    Regarding the "Quick Fixes":
    What are your thoughts on an increase in income of 100K but only for 12-18 Months.
    Would lenders take that 100K salary into account for any refinances, if I refinance at the end of the 12-18 months, while still receiving the 100K salary at the tine of refinance?
     
    BandM, 9th Jul, 2020
    #9
  10. Lindsay_W

    Lindsay_W Well-Known Member

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    Depends on the nature of the increase, eg. if an increase to base wage then no issue, if a bonus type arrangement most lenders want to see consistency.
    So comes down to how you propose to get this increase?
     
    Lindsay_W, 9th Jul, 2020
    #10
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  11. BandM

    BandM Member

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    Thankyou, its basically a 2nd job, unrelated to current employment. So I guess i'm asking is 12 months enough time in employment to be accepted for loans?

    Have found something on another thread, seems like 6 months (possibly 3 or 12 depending on lender) for 2nd Jobs.
     
    Last edited: 9th Jul, 2020
    BandM, 9th Jul, 2020
    #11
  12. Lindsay_W

    Lindsay_W Well-Known Member

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    3 months typically
     
    Lindsay_W, 9th Jul, 2020
    #12
    BandM likes this.
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