Are banks still lending at a 97% LVR for investment properties?

[LisaP]

Hi all,

Just wondering if there are any banks out there still lending to investors at a 97% LVR?

I obtained a pre-approval from CBA for a 97% LVR a couple of months ago, now I have been told by my mortgage broker that CBA has changed its policy and is now only lending to investors at a 90% LVR; however, they are still lending to owner occupiers at 97% LVR.

To get around this, my mortgage broker is going to reapply for me as an ower-occupier, (as this is my first property, so I will be required to live in it for 6 months to take advantage of the FHOG), but I won't be able to use this strategy for my next property purchase.

I didn't realise things were looking so grim out there in Bank Land...

Cheers,

Lisa

 

[Rolf Latham]

Hiya Lisa

Yes there are lenders still doing 95 + capped lmi to 97.

But they are few and far between, and obectively I dont think thats grim per se, just a statement of where we are in the current credit cycle

ta
rolf

 

[LisaP]

Thanks for the reply Ralph.

Now, I have to ask.... which banks are still lending at 95% + capped LMI to 97%? If this has been convered in another post, let me know and I'll do some browsing.

Also, what are your views regarding the current credit cycle? When do you think they will begin to expand access to credit again?

Thanks for your replies. I just bought my first investment property - so learning as I go!

Cheers,
Lisa

 

[Qlds007]

With the introduction of the National Consumer Credit Protection from July 1 2010 i cant see any lessening of lending policies only further tightening.

 

[Rolf Latham]

Hi Lisa


Fast progress in one day

PPOR and an IP in one day

ta
rolf

 

[Bigtone]

Hey LisaP,

Maybe u could start a thread detailing your investment journey, from 0-15 in ? time. Much more interesting and educational sharing the journey than hearing about it after it has been achieved.


BTW i agree buy first one with CBA as O/O and then buy next one as IP with Banwest at 97%.

Good luck and i look forward to your thread

Cheers

Bt

 

[Intrinsic_Value]

however, they are still lending to owner occupiers at 97% LVR.


I didn't realise things were looking so grim out there in Bank Land...

Cheers,

Lisa

talk about one generation forgetting the previous generations knowledge and experience.

A 97% lend is 'so grim'.

Oh yeah i forgot, banks 'used' to do 105% lends, how silly of me,
yip things must be tough.

 

[LisaP]

With the introduction of the National Consumer Credit Protection from July 1 2010 i cant see any lessening of lending policies only further tightening.

I don't know a lot about these new credit reforms, but I should. Will look this up on the gov. website and have a read. I wonder if there has been a discussion on this forum regarding the implications of these changes for investors...?

 

[LisaP]

Hi Lisa


Fast progress in one day

PPOR and an IP in one day

ta
rolf

I don't do things in halves!!

 

[LisaP]

Hey LisaP,

Maybe u could start a thread detailing your investment journey, from 0-15 in ? time. Much more interesting and educational sharing the journey than hearing about it after it has been achieved.

That sounds like a great idea Bt! Why, you must have read my mind!

BTW i agree buy first one with CBA as O/O and then buy next one as IP with Banwest at 97%.

Ah, Bankwest you say. Thanks for the tip.

Cheers,
Lisa

 

[LisaP]

talk about one generation forgetting the previous generations knowledge and experience.

A 97% lend is 'so grim'.

Oh yeah i forgot, banks 'used' to do 105% lends, how silly of me,
yip things must be tough.

Maybe not so grim for the banks, but grim for me. A 97% lend verus a 90% lend makes a big difference to the available cash that I have to play with to purchase more investment properties.

And how would you know what generation I belong to anyway?

 

[Rolf Latham]

A 97% lend verus a 90% lend makes a big difference to the available cash that I have to play with to purchase more investment properties.

Agreed, obvious simple fact, means diff things to diff people though



Current Bank view More expsoure means more rope

Current LMI view Not that fussed up to a point

Current legislative view If you fall over we will see if we can slate the responseability to somewhere else, this means that lenders and intermediaries are less likely to take a moderate risk

ta

rolf

 

[Intrinsic_Value]

Maybe not so grim for the banks, but grim for me. A 97% lend verus a 90% lend makes a big difference to the available cash that I have to play with to purchase more investment properties.

And how would you know what generation I belong to anyway?

Its not 'grim' for you as well, even on a future 90% lend, your return is multiplied by a factor of nearly 10 on your equity if the overall result is positive.

You are still using 'OPM' very effectively (again so long as the net return is positive).

Or is it just not 'fair' that one might need 10% equity anymore?

If the problem is you dont have sufficient savings to create a multi property portfolio overnight, then maybe you just have to wait and save more.

 

[LisaP]

Its not 'grim' for you as well, even on a future 90% lend, your return is multiplied by a factor of nearly 10 on your equity if the overall result is positive.

You are still using 'OPM' very effectively (again so long as the net return is positive).

Or is it just not 'fair' that one might need 10% equity anymore?

If the problem is you dont have sufficient savings to create a multi property portfolio overnight, then maybe you just have to wait and save more.

I agree that it is better than no lend at all. However, obtaining a 97% lend means that I am able to leverage 'OPM' more effectively than at 90%. If you are working on buying as many properties as you can, this is critical.

I purchased my first IP for $252,500. At a 97% LVR I only need to put $7K towards the deposit. At a 90% LVR, I need approx $23K. That is a 16K difference that could be used towards another purchase. Given that my goal is to buy multiple properties (goal of at least 15 in two years), a 90% lend, will restrict the number of properties that I can purchase using my available equity. And yes, I realise I need to take the cost of LMI into account.

Also, I do have enough savings to buy multiple properties. However, I will not only just be relying on my savings, but I will also be using a strategy by which I manufacture equity through the puchase of properties that are priced significantly under market value (based on comparable sales).

Lisa

 

[jingo]

My goal is to buy multiple properties (goal of at least 15 in two years),

That's an amazing goal, Lisa. Just a query, how will you service the loans on 15 properties if you continue to borrow 90-97% of each property's value??

 

[Rolf Latham]

I purchased my first IP for $252,500. At a 97% LVR I only need to put $7K towards the deposit.

only issue there is that the lend still requires 12.5 k deposit, not 7.

Someone needs to pay the LMI premium and it wont be the lender.

I know this is trite, BUT if we are talking max leverage figures there is a 78 % vacuum between those 2 figures, which would cut the goal from 15 to an achievable 9

ta
rolf

 

[vmclee]

That's an amazing goal, Lisa. Just a query, how will you service the loans on 15 properties if you continue to borrow 90-97% of each property's value??

a very good question there jingo, maybe she's got enormous cashflow

 

[LisaP]

That's an amazing goal, Lisa. Just a query, how will you service the loans on 15 properties if you continue to borrow 90-97% of each property's value??

Thanks Jingo

First, my strategy is to target properties under 300K, which limits the size of the interest repayments. Second, as I am buying significantly under market value, I get the added bonus of high rental yield. For metro properties, I will be looking for rental yields above 7% (my current property will return a 7.62% yield), and for regional properties, above 9%. The regional properties will serve to offset any out of pocket costs generated from my metro properties. So, I will ensure that I have 15 properties that are close to neutrally geared, or as a worst case scenario, only costing me a couple of hundred dollars a week to keep.

 

[LisaP]

only issue there is that the lend still requires 12.5 k deposit, not 7.

Someone needs to pay the LMI premium and it wont be the lender.

I know this is trite, BUT if we are talking max leverage figures there is a 78 % vacuum between those 2 figures, which would cut the goal from 15 to an achievable 9

ta
rolf

Yep, my LMI cost me $5K for this property, but I view LMI as an opportunity cost - that is, instead of it costing me $38K to purchase the property, it will only cost me 23K - a saving of $15K, which can be used towards a deposit on another property.

 

[JIT]

Thanks Jingo

First, my strategy is to target properties under 300K, which limits the size of the interest repayments. Second, as I am buying significantly under market value, I get the added bonus of high rental yield. For metro properties, I will be looking for rental yields above 7% (my current property will return a 7.62% yield), and for regional properties, above 9%. The regional properties will serve to offset any out of pocket costs generated from my metro properties. So, I will ensure that I have 15 properties that are close to neutrally geared, or as a worst case scenario, only costing me a couple of hundred dollars a week to keep.

So how do you plan to manage interest rate risk?