Forums / Property Investing / Help Needed! / Banks new servicing from July 2015

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  • Profile photo of westnbluewestnblue
    Participant
    @westnblue
    Join Date: 2013
    Post Count: 35

    Since July 2015 banks have been changing their policies for investment loans.

    For example CBA now has 6% servicing on value of property and 20% loading on all existing loans. So if a property is worth $200,000 The bank will only use $12,000 p/a for servicing even though the property may get $18,000 p/a effectively wiping $6,000 p/a of income per property.

    This may not affect most people but I currently have over 50 Properties at the moment and $2,000 – $4,000 p/a per property adds up to alot of “lost” income which cant be used for servicing.

    Would like to know what other investors are doing to curb this at the moment….

    Profile photo of #Planning Permit#Planning Permit
    Participant
    @planning
    Join Date: 2014
    Post Count: 64

    Shocking! Why this strategy is the big question! But its a lot better than the 18%-24% I paid for my first development properties. How we came out of that is something I forgot and best to leave it that.

    #Planning Permit | AuArchitecture
    http://www.auarchitecture.com.au/
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    Property Subdivision expert with 250 planning permits approved by Melbourne Councils

    Profile photo of Richard TaylorRichard Taylor
    Participant
    @qlds007
    Join Date: 2003
    Post Count: 12,010

    Lenders that are governed by APRA have been changing their investment servicing / general lending policies for some time now.

    How do you combat it ?

    Use a lender that doesn’t service in the same manner.

    We have seen a significant increase in the inquiry level from forum clients wanting to see how they can develop their property portfolios in light of the tightening of servicing and loan planning has become more important than ever before.

    Cheers

    Yours in Finance
    0-40 properties in a decade. Ask me how.

    Richard Taylor | Mortgage Broker helping investors build their wealth thru property
    http://www.mortgagecapitalaustralia.com.au
    Email Me | Phone Me

    0-40 Properties in a decade with a unencumbered portfolio value in excess of $40M. Ask me for a copy of my API Interview.

    Profile photo of Corey BattCorey Batt
    Participant
    @cjaysa
    Join Date: 2012
    Post Count: 1,010

    The changes in response to APRA have been rolling on for a number of months now – I originally wrote an article here: http://www.precisionfunding.com.au/apra-the-evolving-lending-climate-for-investors-challenges-and-opportunities/

    In short borrowing capacity has reduced for all, maximum LVR’s for a large numbers of lenders reduced or restricted and interest rates increased for investors.

    Certainly not the end of the world, but more than ever points of the need for a strategically planned finance structure.

    Corey Batt | Precision Funding
    http://www.precisionfunding.com.au
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    Investment Focused Finance Strategist - servicing Australia-wide

    Profile photo of Jamie MooreJamie Moore
    Participant
    @jamie-m
    Join Date: 2010
    Post Count: 5,069

    The game has changed – it’s all about adapting and moving on.

    More than ever is finance structuring extremely important. I wrote an article about the changes recently – it’s available here.

    Cheers

    Jamie

    Jamie Moore | Pass Go Home Loans Pty Ltd
    http://www.passgo.com.au
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    Mortgage Broker assisting clients Australia wide Email: [email protected]

    Profile photo of westnbluewestnblue
    Participant
    @westnblue
    Join Date: 2013
    Post Count: 35

    The changes in response to APRA have been rolling on for a number of months now – I originally wrote an article here: http://www.precisionfunding.com.au/apra-the-evolving-lending-climate-for-investors-challenges-and-opportunities/
    In short borrowing capacity has reduced for all, maximum LVR’s for a large numbers of lenders reduced or restricted and interest rates increased for investors.
    Certainly not the end of the world, but more than ever points of the need for a strategically planned finance structure.

    Thanks. Ive tried to avoid smaller lenders but it looks like the best option short term until the big 4 change their policies again.

    Profile photo of Corey BattCorey Batt
    Participant
    @cjaysa
    Join Date: 2012
    Post Count: 1,010

    You’ll find it’s not just the big 4 but even the little guys who have been hit by these changes. Fundamentally it’s about building a strong finance structure which works as a cohesive unit – this may include both Big 4, Big 4 subsidiaries and 2nd tier/3rd tier lenders etc.

    The aim of the game is to keep the money flowing for investing, than picking out favourite brands. :)

    Corey Batt | Precision Funding
    http://www.precisionfunding.com.au
    Email Me | Phone Me

    Investment Focused Finance Strategist - servicing Australia-wide

    Profile photo of Richard TaylorRichard Taylor
    Participant
    @qlds007
    Join Date: 2003
    Post Count: 12,010

    Only this morning Firstmac fell in line and has changed it servicing model to follow most other lenders.

    Still the odd lender working off the old script but in order to keep ahead a game it is a matter of structuring correctly to enable you to adapt to an ever changing market.

    Cheers

    Yours in Finance
    0-40 Properties in a decade. Ask me how.

    Richard Taylor | Mortgage Broker helping investors build their wealth thru property
    http://www.mortgagecapitalaustralia.com.au
    Email Me | Phone Me

    0-40 Properties in a decade with a unencumbered portfolio value in excess of $40M. Ask me for a copy of my API Interview.

    Profile photo of LiamLiam
    Participant
    @lblanden
    Join Date: 2015
    Post Count: 17

    Does this mean for first time buyers like me, purchasing investments as PPOR and using these new benefits is becoming more relevant. If i bought a place for 200k and moved in for 6 months, renovated, then sold and repeated, i could take advantage of lower interest rates and slashed CGT?

    Taking into consideration id have to move house every 6 months, could you do this (with due diligence) and create enough wealth to purchase properties outright or at least with a better LTV?

    Profile photo of Corey BattCorey Batt
    Participant
    @cjaysa
    Join Date: 2012
    Post Count: 1,010

    You’ll have a minor benefit from cheaper rates that owner occupiers are benefitting from.

    If it’s your primary residence you don’t pay CGT regardless.

    Might be worth doing a cost/benefit analysis of flipping vs holding and releasing equity on the properties to buy again – you’ll find quite often that the buy/sell costs, government charges etc eat into a significant amount of profit which could otherwise be retained.

    Corey Batt | Precision Funding
    http://www.precisionfunding.com.au
    Email Me | Phone Me

    Investment Focused Finance Strategist - servicing Australia-wide

    Profile photo of westnbluewestnblue
    Participant
    @westnblue
    Join Date: 2013
    Post Count: 35

    UPDATE: Rams has taken 80% rental income.

    Profile photo of BennyBenny
    Moderator
    @benny
    Join Date: 2002
    Post Count: 1,366

    Hi Liam,

    Does this mean for first time buyers like me, purchasing investments as PPOR and using these new benefits is becoming more relevant. If i bought a place for 200k and moved in for 6 months, renovated, then sold and repeated, i could take advantage of lower interest rates and slashed CGT?

    That has been a time-honoured way of bettering your personal accommodation for decades. Even if you only move every year or so, if you sell no CGT to pay, and the equity that you have created while living there is cash in your hand. That provides a better deposit on a “next-level-up” home.

    Probably a good way to go while still single, or while two of you still have no kids. It gets a bit harder after that, but not impossible. This way is still a good way to go without a lot of the stress of being a landlord.

    Benny

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