Changes / tightening on servicing for investors

Westpac's changes were announced and implemented weeks ago. You're being misled. They have definitely had an effect on people's borrowing capacity. Westpac were actually one of the first lenders to make changes.

But "Quickly, borrow now, while you still can!" creates a much better sense of urgency! ;)
 
There's enough options still around at 90% LVR for investors that I don't think this should be a serious concern. If your strategy involved ongoing lending above 90%, the strategy was flawed regardless of these changes. A road block was always going to come up.
 
I just spoke to my West Pac Manager about refinancing, he said the new APRA regulation haven't had any effect yet, but it is a good idea to get your financing done now because it may get tougher. He seemed to think I can get more than what BOM knocked me back on 9 months ago. He said just sald you have been able to meet your commitements in the past so it wont be a problem.

I'd suggest the same as I would if a broker was suggesting same

Before you waste ur credit file,get em the prove he Capacity to service


You either do or you don't

Case by case is rare or pc talk for "wishful thinking"

Ta

Rolf
 
Hi Peter and Jess,
Thanks for your input. I now realise future servicing from NAB will be very difficult. As with others on this forum I will now have to look at those lenders that are more flexible with there servicing calculators and LVR. I guess that's we're Mortgage Brokers will come in handy. Who are the new bank lenders that will be beneficial to borrowers like myself?

It depends on exactly what the problem is - but Firstmac and TMB could still be okay, possibly others too. We'd need to go through everything properly to give you any real answers.

I'd suggest your current loans are probably all x-coll, too if you've let NAB have their way with you. If they are crossed, you've got very limited time to sort it out without it becoming potentially quite tricky and expensive.
 
Any views yet on what portfolio LVRs are sensible in the new lending environment?

1. What about when starting out?

2. What about when steadily growing a portfolio?

I think my general aim is to keep my portfolio LVR below 80% (that's including my PPOR and IP, with the aim of only buying near-neutral or +ve cashflow IPs).
 
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There's enough options still around at 90% LVR for investors that I don't think this should be a serious concern. If your strategy involved ongoing lending above 90%, the strategy was flawed regardless of these changes. A road block was always going to come up.

anything above 80% LVR would attract LMI, so the IP better be really worth it or performing CF+
 
anything above 80% LVR would attract LMI, so the IP better be really worth it or performing CF+

I don't understand this comment, sounds like a uneducated comment regarding LMI. Just because LVR is <80% doesn't mean it's all good to buy. Any property you purchase should be worth it. LMI can be a great tool which allows you to purchase using a smaller deposit/equity. LMI is reasonable priced <90% IMO
 
He said just sald you have been able to meet your commitements in the past so it wont be a problem.

This means virtually nothing. I'm always astounded by the comments bankers make to clients and how people react to them.

You generally service or you don't and past repayment history really has nothing to do with affordability of a proposed new loan. It's a character trait similar to how long you've been in your job.

Clearly he doesn't know much about credit policy of his own bank either with the changes they have made recently.
 
Any views yet on what portfolio LVRs are sensible in the new lending environment?

1. What about when starting out?

2. What about when steadily growing a portfolio?

I think my general aim is to keep my portfolio LVR below 80% (that's including my PPOR and IP, with the aim of only buying near-neutral or +ve cashflow IPs).

If you can manage at 80% do that but would say if in any doubt do 88% + lmi on the IP's to start with and work back to 80% if you hit a road block.
 
Why 88% specifically? Isn't the tipping point 90 --> 91%?

1) Many lenders ie nab, Macquarie, firstmac have a hard lvr cap at
90% so 88% + lmi will generally keep you under that.

2) lmi is considerably cheaper at 88% than 90%. Often a $3-4k saving on average size loan.

3) some lenders price better if lvr is under 90%.
 
1) Many lenders ie nab, Macquarie, firstmac have a hard lvr cap at
90% so 88% + lmi will generally keep you under that.

2) lmi is considerably cheaper at 88% than 90%. Often a $3-4k saving on average size loan.

3) some lenders price better if lvr is under 90%.

And even before the pushy regulators credit score above 90 wasn't the best

Ta

Rolf
 
I don't understand this comment, sounds like a uneducated comment regarding LMI. Just because LVR is <80% doesn't mean it's all good to buy. Any property you purchase should be worth it. LMI can be a great tool which allows you to purchase using a smaller deposit/equity. LMI is reasonable priced <90% IMO

Ah I see. thanks mate for the clarification.
 
There's enough options still around at 90% LVR for investors that I don't think this should be a serious concern. If your strategy involved ongoing lending above 90%, the strategy was flawed regardless of these changes. A road block was always going to come up.
Why do you think such a strategy is flawed ?
There are many properties which are cf+ even at 97% LVR, do you think investing in such properties is bad ?
 
Why do you think such a strategy is flawed ?
There are many properties which are cf+ even at 97% LVR, do you think investing in such properties is bad ?

I'm not talking about the property, I'm talking about the finance. It doesn't matter how great the property is, if you can't get finance then you're not going anywhere.

If your strategy involves you relying on 95% lending, you're almost certainly going to have trouble continuing to get finance. It's pretty much a case of lenders will find excuses not to approve the loans. The recent changes now mean that the banks won't even bother to look at the application, their computer system will save them time and decline the loan for them.

Incidentally a CF+ property doesn't make it a good property, there's a lot more to it than that. A few years ago people were buying properties in mining towns and getting over $1k / month in positive cash flow. They regret their decisions today.
 
Hi,

Not sure if this adds any value to the discussion but please see below from the smh website today.

http://news.domain.com.au/domain/re...-boom-20150601-ghdtuf.html?rand=1433281950212

New mother Nina Young received a shock when she applied for a mortgage.

Confident in the 20 per cent deposit she and her partner David had saved for a two-bedroom apartment in Parramatta, they approached their bank but were rejected because Ms Young was on maternity leave.

"I believe there is still an underlying perception that once [a woman] has children, mothers generally won't want to return to work straight away, if ever." - Michelle Coleman, W Financial.

"They told us to try again, closer to when I was going back to work," Ms Young said.

With lending policies often understating the future income of mothers on maternity leave, new mothers may face a tough decision: spend time with their child or buy a home before the hot market prices them out.

For Ms Young even a freelance income, 18 weeks of government parental pay and a letter from her employer stating her intention to return to work, didn't help.

Their borrowing capacity was assessed at a substantially lower amount than had her salary been included, and they found that suddenly, they were unable to buy.

The couple went back to renting ? paying $100 more than their estimated mortgage repayments would have been.

Over the past year, prices have soared.

"Six months ago, we could have afforded to buy and now we're looking in concentric circles away from the city to see where we can afford."

Full maternity-leave income not always considered
For those with a steady flow of maternity-leave income, not every lender accepts the full amount when calculating what applicants can borrow, said Michelle Coleman, principal of mortgage brokerage W Financial.

"I believe there is still an underlying perception that once [a woman] has children, mothers generally won't want to return to work straight away, if ever," Ms Coleman said.

Without a 20 per cent deposit, it can be even trickier, with borrowers needing to fulfil requirements for Lender's Mortgage Insurance (LMI).

LMI provider Genworth considers 50 per cent of paid income on maternity leave and allows no income allowance where the maternity-leave pay period has ceased or no maternity-leave payment is received.

Some mothers may have to wait until they go back to work to buy a house, said Ms Coleman.

Others will want to try and base the loan on just their partner's wages as lenders look to the net income available to make repayments, according to John Kolenda managing director of 1300HomeLoan.

For families where the mother is the highest earner or where both salaries are needed, lengthy maternity-leave periods pose a problem.

"When lenders assess applications, it is a snapshot of what is happening at that time. Things like upcoming pay rises and bonuses cannot be considered [for mothers on maternity leave] and your borrowing capacity will be determined by what you can prove as income," Mr Kolenda said.

Deferred payments sometimes an option
Some lenders have parental leave options that allow payments to be deferred.

"It is important to note that maternity leave scenarios are not black and white, and most lenders will take the application on its merits," Mr Kolenda said.

Mortgage Choice head of corporate affairs Jessica Darnbrough said it is possible to obtain a home loan on maternity leave.

"While the most ideal time to apply for a home loan is before falling pregnant, often things don't work out as planned. To obtain a loan when on maternity leave, the potential borrowers will not only have to show what the woman's current income is, but they will also have to provide a note from her employer which details when she will return to work, what role she will have and the income she will earn," she said.

Smartline mortgage brokers Katarina Matovina and Kevin Lee said it is a case-by-case situation requiring applicants to provide the lender with Centrelink documents, a letter confirming their intention to return to their previous role at the end of the period and evidence of their return to work income.

Those who are applying when on maternity leave should:

Try not to have a strong reliance on the maternity leave income in the application.
Have maternity-leave dates confirmed.
Look to have consistent maternity-leave income paid across the entire leave period, without any stretches of no income. While some opt for a certain period of half pay and some time with no pay, it's more favourable to lenders to stagger the leave (for instance, a quarter pay over 12 months).
Build up as big a buffer as possible to assist when income is lower.
Use a mortgage broker who knows financial strategies around maternity leave and workshop your options.
Consider opting for 'interest only' during the leave time to provide flexibility.
Enquire with different lenders as to their policies.
Source: W Financial
 
That article doesn't really have anything to do with recent policy changes towards investors. It's always been a bit tricky to have income recognised during maternity leave. Let's face it, a lot of women don't return to work after having children. There is an inherent risk for banks to offer finance on the promise that they will. Easier to decline a loan than to reposes a house from family with an infant.

Lenders became more strict on verifying affordability after the GFC. In the past people have claimed they were offered loans they couldn't afford and 'responsible lending' legislation was put in place to protect people from taking loans they can't afford. A logical conclusion of this is to not consider income that doesn't currently exist (such as returning to a job you're not currently working in).

All that said, most women under financial pressure do tend to return to work if that's what it takes to make ends meet. There are quite a few lenders who will recognise maternity leave.
 
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