Why not Liberty?

I'm doing a refinance on an IP in Brisbane. Used to be my PPOR but now looking to rent it out and draw out equity. Current financier is both complacent and non competitive. Looking to pull out as much as possible but without paying LMI so I expect to be reduced to 80-85% on a previous bank valuation of $600k. Probably sell in a year or so, so I want to dodge early payout penalties. The Liberty rate seems good and a friend refinanced with good effect.
Still haven't got around to my 14-15fy financials so that may be an issue.

I would like some feedback from the forum if possible- either from brokers or people who have used Liberty. Alternate suggestions for financiers are always welcome too.
Thanks in advance.

 

@Steven Ryan (he was talking to me about Liberty yesterday)

 

It was mentioned by some brokers a while ago that when other lenders see Liberty/Pepper etc on a credit report they get very nervous, regardless of the reason behind it. They were usually a last resort lender pre apra changes.

 

I'm looking at Liberty for a few deals at the moment, including one for myself. It's getting to the point where you may not have other options - they are great for servicing.

If you're looking to build a portfolio, I would use other lenders first. Don't use them until you need too.

 

Liberty have a solid track record, being one of the more stable non-conforming lenders during the GFC. In terms of risk as a lender, they're not as stable as the majors, but overall I'd rate them favorably in terms of lender risk.

Liberty is a non-conforming lender, their funding models are not the same as most other lenders. They are not subject to APRA oversight, hence they have not pulled back their servicing criteria and they don't have similar capital requirements, so they haven't raised their interest rates as much as the mainstream lenders.

This makes them quite attractive int he current environment. Assuming you've got clean credit, their 80% investment loan is quite cheap and they have very strong serviceability.

I'd suggest using them late in the game as they are limited in how much they can fund. They also have a higher risk of increasing rates in the future. They're not excessive in exit fees, but simply due to servicing restrictions, there might not be many alternate lenders to go to if you want to refinance.

I'd use other lenders first, but when those options run out, Liberty is a reasonable choice to get things just a little further.

 

They have their place, especially, as others have mentioned, late in the game due to the generous servicing. Rates/features are pretty good.

There's other circumstances when they might make sense too but very case-by-case e.g. clients early on with strong financials who want to take advantage of high LVRs (e.g. 95% + LMI P&I) to get into more property (esp. sub-$300k) sooner and/or leave money on the table to renovate/add value/boost cashflow with the view to refi to a major in a couple of years. Lots of things to consider for deals like this but they have their place.

I am sure they will be doing a lot more business in the post-APRA environment.

 

Thanks for the insights one and all. I expect my credit history is clean other than a ping from my current financier on my request for a refinance. I'm probably at the no other options stage (well I hope not) only I was favourably impressed by my mates refinance from NAB to Liberty to clear credit card debt (not a major issue in my case) and add on to the mortgage- on 30k credit card debt and 430k mortgage he is $800/month ahead.

As I guard my credit history jealously the prospect of being "tainted" does concern me given it has been raised by more than one broker here and I intend to borrow in the future.

So if I were to go with an alternate lender what are people's favorites at the moment?

 

You mentioned your 14/15 Financials not yet ready. Are you self employed?

 

Yes. I'm in the process of compiling them but I traditionally leave it as long as possible as there will no doubt be a debt. Nothing to hide- in fact income will be up from a crappy 13/14 year so that will help serviceability.

 

Their servicing calculator makes them attractive and worth discussing, they'd be getting a lot of business now. Rates are competitive definitely, but this is a moving beast and can change over time - i wouldn't be promoting them purely based on rate. They have created a niche window for themselves with their servicing calc and are drawing in business.

Peter summed up how to use them - go to other lenders first, and if you want to stretch it, Liberty are one of the few go to players.

In saying that, its best to acknowledge the risks of this finance strategy though. The ability to refinance down the track may be slim to none (if your going there to stretch serviceability).

The reality is serviceability may become tighter over time, not looser (we are in a record low interest rate environment). Liberty is a funder who is out of line with the rest of the market, it is very likely they're serviceability policy settings won't be this good relative to market down the track (when refinancing/equity pulls/etc may be necessary).

So its worth considering these finance risks strategically and seeing how your portfolio may look beyond the next transaction and over time (e.g. no interest only extension, potential rate rises, buy outs, etc).

I'd be suggesting them for 5 year buy and hold plays, for people that have/can generate appropriate buffers to absorb any P/I repayment shock in due time. Basically trying to manage the above risk.

Cheers,
Redom

 

What other lenders out there are not APRA controlled?

 

I have just refinanced 2 loans to Liberty and a new mortgage loan plus a deposit loan.No problems at all. Interest rate was competitive, there was no underlying reason to use Liberty.The online portal is a bit basic though,the bare minimum on client accounts,but easy to navigate.

 

First Mac, Pepper, GE, Bluestone.

 

Quite a few, but they're the smaller lenders and mortgage managers.

Keep in mind this isn't all about APRA either. APRA have been the drivers of the last 8 months of change, but issues like serviceability actually falls under ASIC oversight. Every lender must be licensed and therefore is subject to ASIC review.

Simply looking to lenders that don't answer to APRA isn't a solution in itself.

 

Would anyone be able to give an example of what Liberty and the other non-conformers do servicing calc wise? Take actuals? Non-shaded rental amounts? I'd be interested to see how they calculate existing IO loans held with other providers, will definitely help me out a truck load!

 

Actual repayments on other institution debt - this makes them fairly unique. Rental income at 80%.

 

Hi @Peter_Tersteeg thanks for the post. Could you please explain what do you mean by "they are limited in how much they can fund"?

What's everyone's thoughts on Mortgage Mart? I hear they have loosened their servicing also - to actuals.

 

They generally have a limit of $1.5M that they'll lend. Odds are even with them most people would run out of servicing first.

Mortgage Mart does have good servicing models for some of their products as well.

 

In regards to the "other lenders get a bit scared when they see liberty/pepper on credit files".
Do any brokers have actual examples of this? I understand the concept but surely a good history of repayments would knock this on its head and in cases where they went simply for rate (as may be a lot of cases with Liberty at the moment) it could be simply explained by the broker??

Lender - "Why is there finance with a non conforming lender?"
Broker - "Because they had a great offering at the time".