Bank serviceability.

Loui wrote:

Hi guys,
Are all banks now assessing servicing around the 7.50 per cent? Do they provide flexibility if your fixing in your loan say for 3 or 5 years? Speaking to my lender they said no. Also it’s ridiculous to think all investment loans are assessed at principal and interest and not on interest only if that is your long term strategy. I can understand home loans but investment loans? Looking forward to what we people think.

Hi Loui,

Yes, most lenders assess servicing at 7.25%-7.5%. There are differences between the lenders as to how they assess existing (and new) loans so it’s worth checking with a few lenders (or, better yet, a broker).

Yeah, the P&I assessment for INV is annoying but it does make sense. It’s a way to ‘stress test’ the borrower: if you can handle P&I and higher rate, you’re solid. As mentioned, not all lenders are the same but the idea is (APRA).

Hope this helps? 👍😎

Cheers,
Ethan

Lenders have always stress tested new debt being applied for – which is currently hovering between 6.5-8.5% stress tested rates between the lenders. The big kicker is with existing debt which has seen the dramatic shifts in borrowing capacity. Quite a few lenders would previously treat existing debt repayments at the actual amount paid, however with the government regulator applying pressure many are now testing it at the same level as new debt.

There are still lenders however who just stress test it at a lesser degree than those lenders, and even some which still take existing debts at the actual amount.

This is where an investment focused finance strategist can shine – as they have access to the broad range of products which will have these features, instead of being stuck with one lender with one set of policies and a handful of products.