Changes / tightening on servicing for investors
- Thread starter Marty McDonald
- Start date
Maybe he's referring to the broker industry, not the real estate industry?
Yep - that's how I read it too...and if so, I agree. Good brokers will become more valuable as lending criteria tightens.
Cheers
Jamie
It's about 50/50 actually. Yes, it provides good opportunities to brokers that understand investment and can put a few creative things in place. It also means that longer term finance planning will become necessary for aggressive investors.
It also means more opportunities for investors that are cash up, not too highly geared and not pushing the absolute limited of their affordability.
You're not going to get much love as an investor trying to do things at 90%. It's still on the table but it's getting tougher for a number of functions. If you're only gearing to 80%, I suspect there will be a lot of opportunities available that you might not get if you gear beyond that.
All of the changes appear to be focused on slowing down the investment markets (both locals and foreigners). If you're sitting on a lot of equity or cash, you'll be more likely to be able to be able to access deals that others might not.
I think these changes are going to turn investing into a marathon, not a sprint.
My suggestion is get access to your equity sooner rather than later, because it might be tough to get hold of later. Don't push the limits of your serviceability, don't cross collateralise. Cash flow will become even more important, but so will a strong equity position. The trick will be finding the right balance because higher risk lending isn't going to cut it any more.
All Mac have done is insert an Interest Only period with a maximum of 5 years on their calc. So their calc now assesses first 5 years I/O ( if you select 5 years on the drop down) and the remaining term at P & I . However, they still take neg gearing and they still take actuals on all external debt and all Mac debt over 6 months old. ( for the time being ) so the impact on their calculator is not significant.
But they also reduced I/O to 90% max LVR many months ago, and they already assessed any LVR above 90% as P & I and using a DSR of 1.20 vs the 1.05% they accept to 90%. In other words, they were ( and still are) pretty much top of the pile for investor servicing up to 90% LVR but they aren't even top 5 ( and havent been for quite some time) above 90% LVR .
And of course...provided you dont have any other NAB debt, NAB are excellent for investors, and up to 95%LVR
But if you do have a chunk of NAB debt ( that means Ubank, Homeside, NAB or any other NAB branded or owned or funded debt) they treat that debt harshly. 7.4% harshly in fact... so you may also want to look @ Firstmac, who still offer 10 years I/O , neg gearing, actuals on all external debt and take 80% rental.... so for those of you looking for something as a solution to your 5 year I/O woes, or your borrowing capacity woes, there's your possible solution. Their online brand loans.com.au does the same thing, but cheaper... But dont tell any of the brokers on here
Wow - interesting reading - one thread on my watch list!
I remember around 2008 attending a training course at a hotel in Newcastle. The seminar room next door had a whiteboard setup. On it was scribbled 'New LVR rules' or something like that.
I guess there will be lots of brokers and bankers going into training sessions like that.
I remember around 2008 attending a training course at a hotel in Newcastle. The seminar room next door had a whiteboard setup. On it was scribbled 'New LVR rules' or something like that.
I guess there will be lots of brokers and bankers going into training sessions like that.
Everything Euro has mentioned is accurate, great post. It's these features that make them perform well for investors. I'm concerned that some of those policies for Macquarie and NAB may change in the near future however.
Euro, great post as always. A few things have changed though.
Macquarie no longer take actuals on their own debt. No public policy announcement change, but i've heard it via my BDM at Macquarie earlier this week. 7.00% assessment rate (P&I). No more refreshing after 6 months.
This was always an anomaly and a change that was always likely to come about.
Regarding NAB 95er's - credit scoring is a real pain at this LVR, so while its possible for investors, its becoming a whole lot more difficult.
Regarding FirstMac - i'm pretty sure they use 70% rental income once you've reached a rent reliance point. Still pretty good though - but i haven't used them much for investors who require them for servicing as theres generally been ample alternatives. Their brand with brokers has probably taken a bit of a hit with loans.com.au and FirstMac - a bit of channel conflict concern there.
Cheers,
Redom
I only sold one property in my lifetime, and it had to be in that period where I was slugged with the NSW vendor tax. I think it was around 2-3% of the sell price.
wondering they will bring this type of tax back in attempt to cool down the Sydney market?
If you do have a chunk of NAB debt ( that means Ubank, Homeside, NAB or any other NAB branded or owned or funded debt) they treat that debt harshly. 7.4% harshly in fact...
Firstmac, so far at least - take actuals on all external and firstmac debt, and so far at least, take 80% rental. And for NRAS investors, they also take 80% of the NRAS incentive up to 80% LVR , provided they also hold your PPOR. So, one way to continue to be able to invest when you have good equity but have run out of capacity elsewhere is this;
Refi your P & I to firstmac, onto their VIP Package which offers 10 free sub accounts, 10 years I/O, offset a rate of 4.19% , then do as many stand alone INV deals as you can with lender XYZ , then NAB at 95% then Macquarie at 90% , and then if you hit a wall , drop down to 80% LVR and move to an NRAS strategy to keep going... up to another $2million , when firstmac will turn off the taps. It's easy to see just how potent it may be.
Yes these are just concepts... of course. But for the time being at least, concepts that are working for me and my clients
95% is credit scored at NAB but I have a 99.9% success rate for my clients, for the time being at least. Firstmac uses the Genworth calc and it's still at 80% rent + neg gearing for the time being... and as I mentioned in a previous post, NRAS can make their calc quite potent under the right circimstances ( 80% LVR + firstmac holding your PPOR) so it's conceptually at least , a very very interesting alternative to defeat the servicing wall.
I think a number of the posts here are about conventional servicing walls - I just wanted to highlight how the NRAS /firstmac ( and Adelaide bank via mortgage managers - to a lesser degree ) approach can be utilised to get well past conventional servicing walls, provided sufficient equity is available to take advantage of it. That should be quite appealing to Sydney investors in particular who should have plenty plenty plenty said equity at the moment.
Many of these things tie in with arguments I started posting about several years ago; Using the right lenders in the right order. Borrowing capacity reaching exhaustion via conventional means, then coming back full circle to NRAS and utilising firstmac or adelaide bank( via mortgage managers).... In the end, as I have always maintained- equity is NOT enough to keep going unless borrowing capacity continues to improve for the majority of people. But cash flow ,especially NRAS cash flow which when redirected towards a non deductible mortgage manufactures aggressive debt reduction and therefore, over time, significant additional borrowing capacity, IS very useful ... and the thing that's been hiding that very obvious fact from most people is the ability of banks to manufacture borrowing capacity other ways so far , either via LVR /credit expansion policies (up to the GFC) or big rate cuts (post GFC) which are passed through to servicing calc policies ( until now) .
As I have always maintained, once those policies became exhausted, as it appears they are now starting to become, borrowing capacity starts to dry up fast for many investors, which will in turn eventually flow through to the slowing of growth as it eventually affects more and more investors. Then, the only effective strategy left with which to manufacture borrowing capacity is aggressive debt reduction - which requires either significant pay rises, a lottery win, an inheritance OR higher cash flows. OR investors can simply start selling up - that would also create significant additional capacity
Ultimately though, the comments on this particular discussion reinforce what I have always maintained - that before all else the ready supply of credit drives growth. As a very simple example - If I have the last cup of coffee in Australia and 20 million Australian coffee addicts want it, and I'm asking $11 for that cup of coffee..... it hardly seems to matter what side of the supply v demand equation I'm sitting on ( one would think I'm very much on the "lucky me, I'm going to make a killing" side of that particular equation, right? ) if none of those 20 million coffee addicts can borrow more than $5 from any bank...
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Winter is definitely coming for those who have been doing equity releases up to 90%, IO and rather tight servicing (heaps of those in the past 12-18 months).
Decent opportunity for those who are cashed up and have decent servicing.
Decent opportunity for those who are cashed up and have decent servicing.
Thanks again euro
Learnt so many new things from ur post
How does adelaide bk via mortgage managers compare with firstmac
or even me bank in terms of assessing its own debt and max borrowings
Given loans.com.au is owned by firstmac, can u do 2mill with both, or just 2mill total between the two
Thanks
Learnt so many new things from ur post
How does adelaide bk via mortgage managers compare with firstmac
or even me bank in terms of assessing its own debt and max borrowings
Given loans.com.au is owned by firstmac, can u do 2mill with both, or just 2mill total between the two
Thanks
It will be interested to see the tightening lending policy coupled with some interest rate increase in the next 18 months.
Spoken to some local agents and solicitors on the ground, they do feel a bit less volume compare to this time last year.
But somehow Asian(Chinese) oversea investors still keep coming in
Spoken to some local agents and solicitors on the ground, they do feel a bit less volume compare to this time last year.
But somehow Asian(Chinese) oversea investors still keep coming in
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