Lo Doc Loan changes in the wings

[Rolf Latham]

Hiya

Bit of goss on Suncorp and ING Lo doc loans.

Many changes coming up, the most important ones to most borrowers to keep in mind when building their portfolio are that now all Lo doc loans with an LVR greater than 60 % will require mortgage insurance.

Although it hasnt been stated in the broker releases this is likely due to NOT an an increasing rate of defaults, but mainly APRA getting paranoid that these loans will have a higher fallover rate. There were noises that if lenders didnt lower the uninsured LVR to 60 % that they would ask those lenders to increase their capital reserves, thereby increasing their cost of money.

The impact of that is more severe than is at first apparent. It means that almost all reasonably priced lo doc product will now have "Cash out" limits of 150 k where the lvr is greater than 65 %.

This will make it interesting for many of the full time investors/renovators.

ta

rolf

 

[Sunfish]

Hi Rolf; Any time scale on when it will become effective?

T

 

[Rolf Latham]

Hiya

Suncorp next week and ING 1 oct

ta

rolf

 

[Lissy]

Sigh....
My life just got a bit harder again.
I maxed out LMI a while ago!

 

[Rolf Schaefer]

Lissy,
St George and Westpac have their own mortgage insurance so you may still be able to use LowDoc loans from these banks.

 

[Lissy]

Thanks Rolf!
I do have one loan through St George lo doc, seems to have gone well so far. So I am certainly keeping them in mind for next time around!
I plan to go back to NAB BUsiness Banking shortly with my new tax returns and see if I can get any joy there this year.
Fingers crossed!

 

[karina]

Rolf,

can you explain what you mean by

The impact of that is more severe than is at first apparent. It means that almost all reasonably priced lo doc product will now have "Cash out" limits of 150 k where the lvr is greater than 65 %.


Also can you confirm that the mortage insurers now need to aproove the loan from 60 -80%. My broker seems to be under the understanding that I would need to pay a premium to suncorp from 60-80 LVR to cover the mortgage insurance but that I don´t need to qualify for mortgage insurance . is that correct?

I have just scraped through with a loan with suncorp for 75% no mortgage insurance !!! Just in time.

thanks,
k.

 

[noddy]

Rolf,

I'm also trying to understand the "Cash Out" limit of $150K statement as well. Can you please elaborate??

In layman terms what does this change really mean?

Noddy

 

[juzz]

Just some info for the ones about to have problems with this.

Many lenders in the private finance industry can & usually do, self insure.
The rates can be anywhere from 0.5% higher to 2% higher than comparative
bank & 2nd tier product rates.
But if it helps to do the deal & you can afford the higher rate it may be
an option for some..


Justin

 

[Rolf Latham]

Hiya Juzz

Thanks for bumping this back up,

Karina, you did well to get in just before the changes, now youd have to pay lmi above 60 % LVR

Noddy, the 150 k cash out means that if have an IP worth say 220 , and no loan on it, the maximum "LOC" you can get on it for unspecified use is 150 k, even though at 80 % youd think youd get 176.

Cash out limits can be gotten around over time though
ta

rolf

 

[Medine]

Hi Rolf!

Taking your advice

Mmmmm - interesting that Suncorp used APRA as their excuse. This seems inconsistent with Adelaide Bank, who have just made their Low Doc loans cheaper and more attractive (presumably to attract more business)?!

Cheers, Medine.