More than 50% of income via rent
- Thread starter Singo
- Start date
As stated on the other post - this only applies to loans over 80% LVR.
The WBC has advised the person the wrong thing.
St George is another lender that has this stupid policy for loans over 80%.
Under 80% and this rule does not apply.
It gives me the shiites when people give blatantly wrong advice/information.
The WBC has advised the person the wrong thing.
St George is another lender that has this stupid policy for loans over 80%.
Under 80% and this rule does not apply.
It gives me the shiites when people give blatantly wrong advice/information.
Forgot to mention that even at over 80% you have ways around it......
In the scenario where the LVR is greater than 80% and rental income is greater than the PAYG income, Westpac assesses the application as if the borrower is self employed. This means that instead of payslips, they ask for 2 years tax returns.
In theory this isn't such a big deal, but in my experience, in this type of scenario, the investor has substantial amounts of depreciation and other gearing related deductions. As a result the tax returns often have a fairly low taxable income, which in effect can sabotage the loan application.
It tends to make Westpac a lousy choice for high LVR investors with large portfolios.
In theory this isn't such a big deal, but in my experience, in this type of scenario, the investor has substantial amounts of depreciation and other gearing related deductions. As a result the tax returns often have a fairly low taxable income, which in effect can sabotage the loan application.
It tends to make Westpac a lousy choice for high LVR investors with large portfolios.
Singo,
This is more of an LMI thing rather than a bank-specific one. Most banks actually don't care if an applicant is 'rent reliant' as long as it is below 80% LVR. Had a client whose rental was probably 5x her PAYG income...no issues.
Some banks that don't have this policy with the most popular being homeside.
20 tennants
one job
Rental reliance ?
Really ?
Still....... AMPs stance on 10 plus Ips takes the podium, unsuitable borrower same as an undischarged bankrupt.
ta
rolf
one job
Rental reliance ?
Really ?
Still....... AMPs stance on 10 plus Ips takes the podium, unsuitable borrower same as an undischarged bankrupt.
ta
rolf
With them or in total? How do they come up with this stuff?
Given that all banks have shareholders who are looking for optimum return, isnt it odd that they havent all gravitated toward the same policies as each other?
With them or in total? How do they come up with this stuff?
Given that all banks have shareholders who are looking for optimum return, isnt it odd that they havent all gravitated toward the same policies as each other?
Obviously it must work!
With them or in total? How do they come up with this stuff?
Given that all banks have shareholders who are looking for optimum return, isnt it odd that they havent all gravitated toward the same policies as each other?
In total
So your mate has 10 fully paid off IPs in Peppy Grove, and wants to buy a hut In Kal....................aint going to happen with AMP.
ta
rolf
AMP's policy limits an investor to 10 properties but if the application is strong then they will happily make exceptions.
BDMs will tell us what we want to hear.
As an aside, we wont work in the area of "exceptions" and higher delegations for obvious reasons unless there is no other workable lender within their policy.
I have learnt my lessons on running the edge of the envelope a long time ago, it came to bite me and clients, and im not going there any more, because once again times will change.
ta
rolf
I am referring to 2 applications that were accepted and a policy exception was granted based on the strength of the application. In both cases the clients were existing AMP customers which adds weight to the case.
It goes without saying that a lender with a policy restriction is not option 1 but the point of the statement was that it is an option if there is a need to put the application to that lender.
It goes without saying that a lender with a policy restriction is not option 1 but the point of the statement was that it is an option if there is a need to put the application to that lender.
Speaking of AMP and policy - they have now changed from 90% LVR including LMI to 90% plus LMI which is awesome news.
Plus they are dropping their 2 year fixed rates to 4.69%
Plus they are dropping their 2 year fixed rates to 4.69%
Without existing client to hand hat on, that exemption wont fly.
I think its important that when we make statements that others may rely upon (which they should not, but sometimes do) that we provide all the material information, or at least as much as is reasonable.
ta
rolf
On this point I agree.....dumb and dumber are running the credit departments.
I agree with your point....lets say you have 20 tenants and rental income of say 300k and your income as a executive is 250k.
I see the riskier of the two being your job...especially in these times.
This just shows how out of touch people running credit departments are.....they don't even seem to understand risk?
I agree with your point....lets say you have 20 tenants and rental income of say 300k and your income as a executive is 250k.
I see the riskier of the two being your job...especially in these times.
This just shows how out of touch people running credit departments are.....they don't even seem to understand risk?
Crazy world of credit and risk assessment...
I completely agree that someone with multiple IPs is less of a risk than someone with a single job, but the risk assessors do have a different view and given they're the ones handing out the money, it's the one that counts. It is somewhat along the following lines of thought:
* If you have 20 IPs, then you have a have high debt commitment levels.
* Country wide, it costs more to hold a property than the income it produces the majority of investment properties are negative geared by lenders risk standards (assessment at SVR + 2% on P&I repayments over 25 years).
* Ergo, investors with multiple properties are very heavily negatively geared and it follows that they have very slim margins of cash flow.
* We also know from our statistics that properties are vacant for 2 weeks every years. If you have 20 properties, at least one of your properties will be vacant almost 50% of the time.
=> We've established that you've got cash flow issues, now we've established that you have vacancy issues. By having multiple investment properties you're high risk due to rent reliance.
Whilst there is a deformed logic in this, it obviously doesn't take into account the actual repayments, the fact that an investor with 20 properties is actually likely to have some that are positive cash flow because they've held the 'average' property for years and have had rental increases or have reduced debt. It ignores the fact that any investor with a large portfolio has quite a bit of risk management experience and can usually cope with regular vacancies.
Still, it comes back to the fact that they've got the money, so the decision is in their hands.
I completely agree that someone with multiple IPs is less of a risk than someone with a single job, but the risk assessors do have a different view and given they're the ones handing out the money, it's the one that counts. It is somewhat along the following lines of thought:
* If you have 20 IPs, then you have a have high debt commitment levels.
* Country wide, it costs more to hold a property than the income it produces the majority of investment properties are negative geared by lenders risk standards (assessment at SVR + 2% on P&I repayments over 25 years).
* Ergo, investors with multiple properties are very heavily negatively geared and it follows that they have very slim margins of cash flow.
* We also know from our statistics that properties are vacant for 2 weeks every years. If you have 20 properties, at least one of your properties will be vacant almost 50% of the time.
=> We've established that you've got cash flow issues, now we've established that you have vacancy issues. By having multiple investment properties you're high risk due to rent reliance.
Whilst there is a deformed logic in this, it obviously doesn't take into account the actual repayments, the fact that an investor with 20 properties is actually likely to have some that are positive cash flow because they've held the 'average' property for years and have had rental increases or have reduced debt. It ignores the fact that any investor with a large portfolio has quite a bit of risk management experience and can usually cope with regular vacancies.
Still, it comes back to the fact that they've got the money, so the decision is in their hands.
LOL yes I remember my RAMS broker (before I hit my borrowing limit with RAMS/WBC) having the same argument with credit.... they would happily lend whatever people heavily CF- wanted due to gearing benefits, but someone who was CF+ was "rent reliant" and a credit risk.
Makes no logical sense.
Clearly shows how out of touch bank credit departments are.....everyone now relies on computer screens.
Very little analysis or understanding overall portfolio is done. In some instances people who are approving this would explain how exactly the systems works.
Very little analysis or understanding overall portfolio is done. In some instances people who are approving this would explain how exactly the systems works.
