Has the policy changed for investment property loans?

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thomas
Posts: 64
Joined: Wed Jun 24, 2009 4:16 pm

Has the policy changed for investment property loans?

Post by thomas »

Hi,

I purchased an investment property at the beginning of the previous year and it’s been profitable thus far. So I purchased another investment property off the plan a few months back.

I needed a loan for it so before purchasing, I’d spoken to my accountant. He’d agreed that I could afford to put down enough deposit for the property. He’d also said that I’ve got enough income to make the repayments regularly.

Anyway, a few days back, I heard from a colleague that there have been massive changes in the lending policy for investment loans. And because my accountant is on a vacation and out of touch, I had no idea where to turn to find reliable information.

Luckily, a friend of mine recommended this forum to me, so here I am. Can anyone help me understand the kind of changes that have been made?

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Otto Dargan
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Re: Has the policy changed for investment property loans?

Post by Otto Dargan »

Hi and welcome to the forums thomas.

Australian Prudential Regulation Authority (APRA) may be taking steps to stabilize the prices of property in Australia by putting brakes on the loans for investment purposes.

Some major lenders have started changing their investor policies. Here are some of the major changes that have been made:
  • Higher interest rates: Some lenders are increasing the interest rates for investment loans. For example, Commonwealth Bank (CBA) cancelled the pricing requests for investment loans, and Macquarie increased the interest rates for investors.
  • Larger deposits: One of the major lenders recently announced that they will be lending only up to 80% of the property value from now on compared to 95% previously. This means that the borrowers may need at least 20% of the purchase price as a deposit to qualify for an investment loan.
  • Decreased borrowing power: Several lenders have changed the way they assess a borrower’s capacity. Some are doing this by increasing the interest rate that they use in the assessment of a loan application, or by decreasing the amount of rent they accept.
  • Changes for foreign investors: Two major lenders recently announced that they are reducing their foreign investor loans from 80% of the property value down to 70%.
However, although the major lenders, that have a large share of the investment market, have made these changes, the smaller ones have not yet done so.

Cheers,
Otto
Otto Dargan
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P | 1300 889 743
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thomas
Posts: 64
Joined: Wed Jun 24, 2009 4:16 pm

Re: Has the policy changed for investment property loans?

Post by thomas »

This is bad news no matter how I look at it. If these changes have been made, then I don’t think I’ll be able to afford the new property that I was planning to buy.

Do you think that I can still get approval on my loan?

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Otto Dargan
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Re: Has the policy changed for investment property loans?

Post by Otto Dargan »

Hi thomas,

Yes, your loan may still be approved. However, your situation has to be assessed before it can be decided. If your loan is still not approved then you may not be able to complete the purchases of the properties that you bought off the plan.

You may also lose all your deposit on those properties and may be sued by the developer for not completing the contract. This is why you have to act as soon as possible and call a specialist mortgage broker now.

If you want help in getting approval on your loan, then you can give us a call on 1300 889 743 or fill in our free assessment form and one of our brokers will contact you instead.

Cheers,
Otto
Otto Dargan
Mortgage Broker
P | 1300 889 743
Home Loan Experts

thomas
Posts: 64
Joined: Wed Jun 24, 2009 4:16 pm

Re: Has the policy changed for investment property loans?

Post by thomas »

Honestly, it’s a bit scary to think that I might even get sued because of the policy changes. Anyway, I’ve got to try my best not to get all caught up in this. I’ll definitely call you by the end of the day tomorrow to further discuss my situation.

sandysmith
Posts: 47
Joined: Thu Jun 27, 2013 9:19 pm

Re: Has the policy changed for investment property loans?

Post by sandysmith »

Hello there,

My husband is an investor. He owns a couple of properties and I’m sure he’s planning to invest in some more. I’d taken the day off from work today and as I was surfing the net, I read about the massive changes in the lending policy for investment loans.

I’ve yet to talk to my husband about this and maybe he’s already aware about the situation. In any case, can anyone here recommend how an investor should go about handling these changes?

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Otto Dargan
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Joined: Sat Sep 06, 2008 5:55 pm
Location: Sydney, Australia
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Re: Has the policy changed for investment property loans?

Post by Otto Dargan »

Hi sandysmith,

It is recommended that you act as soon as possible regardless of whether you own an investment property or are planning to buy one. If you own an investment property currently, then you may start comparing interest rates in the market. You may have to switch your lender to get a better rate that will best suit your loan.

If you plan to buy an investment property then it may be best if you get pre-approved now. Most lenders are honouring their pre-approvals. Therefore, you may be able to get the loan before the change in policy sets in, if you can find a property within three months of the approval.

If you purchased an investment property off the plan, then you must speak to an investment broker who can assess your situation, and recommend you the most feasible solution. It may be difficult for you to approach lenders because they are also going through these changes and are trying to avoid any sort of complication.

You can give us a call if you want help in finding the most competitive interest rates or getting approval on a loan.

Cheers,
Otto
Otto Dargan
Mortgage Broker
P | 1300 889 743
Home Loan Experts

sandysmith
Posts: 47
Joined: Thu Jun 27, 2013 9:19 pm

Re: Has the policy changed for investment property loans?

Post by sandysmith »

Thank you for offering to help! I really appreciate it. I’ll talk to my husband about this matter tonight and will ask him to give you a call. Thanks again, Otto!

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