September 06, 2016
Many of Australia's lenders have recently made signficant adustments to their investment lending policy and pricing, leaving existing and potential investors asking: "how do these changes affect me?"
What changes have Australia's lenders made to their suite of investment products?
These changes include (but are not limited to):
* The removal of discretionary pricing. This means investors no longer recieve further discounts off the advertised interest rate.
*Interest rate increases. Over the last few months, many of Australia's lenders have increased the interest rates across their suite of investment and interest only home loan products, making the cost of borrowing more expensive for potential investors.
* The removal of foreign income for servicing. Those who earn an overseas income (i.e. they may receive rent from a propertytehy own in another country) can no longer use this income when trying to prove they can service their home loan. Today, many lenders will look only at the income a borrower earns within Australia when establishing home loan serviceability.
* A reduction in the proportion of rental and other investment income for loan servicing. Lenders have reduced the amount of 'rental income' they will accept when establisihing whether a borrower can service their home loan. In other words, some lenders who were previously happy to use 100% of the rental income a potential borrower recieved when establishing home loan serviceability, will now use a smaller percetage of the rental income.
* A reduction in maximum loan to value ratio (LVRs) for investors. Many lenders will no longer lend above 80% LVR to investors.This means many property investors may have to increase the size of their deposit or look for a lower value property.
To find out what specific changes are for a specific lender, it's important to seek professional mortgage advice.
What impact will these changes have on my investment plans?
The reality is, even with the changes, Australia's lenders are still actively competing for business. With more than 20 lenders on our panel, we believe these changes will - in most cases - have no material impact on you or your ability to obtain finance for your future investment property. At Mortgage Choice, we will get to know your unique financial needs and circumstances then work with you to find a lender and a loan that is right for you.
Will we see more changes over the coming months?
Absolutely. Australia's lenders will continue to tweak their policy and pricing from time to time in order to grow and/or stem their business flow as required.
Is now a good time to buy an investment property?
With interest rates sitting at all-time lows and property prices continuing to climb across most key markets year after year, now is a great time to be a property investor. When buying an investment property, it's crucial that you do your due diligence, research the suburb/s you would like to buy in and understand what property investment entails.