investors have options when it comes to Home Loans
Despite regulatory pressure on the banks – there are still options for investors. But only if you know where to look.
16 Nov 2015
In response to the booming property market, and ongoing regulatory changes, we’ve recently seen the big banks introduce a number of steps to curb borrowing for property investment.
Most significantly, many lenders have raised interest rates for property investors, so for the first time since most can remember, many investors are paying interest at rates higher than what is charged to home buyers. Then many banks introduced tougher loan-to-value ratios, requiring investors to stump up larger deposits when buying an investment property.
However, the banks haven’t stopped there. In recent weeks we’ve seen investors applying for a new loan also being subjected to stress testing on the monthly payments for their existing investment loans. This means when an investor goes through an application for an additional loan, banks make the assumption that interest rates will change and investors will have to pay back all their loans at a higher rate at some point. This has the consequence of altering serviceability results, which significantly decreases the approved borrowing amount. Small margins that affect your serviceability rating could reduce a loan by tens of thousands of dollars. In a competitive property market, this can be the difference between having a enough credit to secure a property, or not.
So, where does this leave budding property investors?
Industry commentators have reported that some investors may go as far as posing as owner/occupiers during the application process to get lower rates, which suggests they are clearly concerned about their prospects. On the other hand, investors may choose to move into one of their investment properties to become owner/occupiers and avoid the added costs.
The truth is, investors are actually in a good spot – but only if they are free thinking and ready to look beyond the banks.
Non-bank lenders are well positioned to offer high performance investment loan products – both in terms of rate and flexibility of lending criteria. If you’re looking to invest in property and have an existing portfolio, it’s worth asking your lender how they will treat your existing investment debt when it comes to determining your serviceability for any new investment loan. If stress testing applies and every dollar counts - then it may be time to take your business elsewhere.