Looking into the changing landscape of investment loans
With the heated property market of recent years, more news has come that the banks are now cracking down on investment loans in Australia potentially making it harder for people to fund a new investment property purchase.
If you are planning on getting funding for your investment property then it is best to understand why it may be harder to do that and what you may need to do to manage a successful investment loan approval.
Here are 5 impact of this change:
1. Taking the heat off the booming housing market
In a recent article in the Sydney Morning Herald, it highlights that banks are apparently putting a halt on lending to housing investors, pushing tougher policies in the process. Experts believe this is a way to put off some steam from the booming house market. Due to immense pressure from public and private regulars, major banks are raising their interest rates for a number of new property investors through reducing or scrapping lucrative discounts provided regularly.
2. Ensures investors have sufficient equity in a purchase
The lending industry has also been taking a tougher stand on deposits. With many of the big banks now, property investors will only be able to borrow 80 percent of the property value. This now means they must come up with a full 20% deposit and can’t rely on mortgage insurance to cover it, as was the case previously.
3. Reduced risk with improved loan-to-value ratios
Banks in Australia like Bankwest have also taken steps to restrict the loan-to-value ratio lending to 80% from 90%. This means that investors with previous pre-approval loans that have 95% LVR following the decision will have their applications voided. This has been the result of Commonwealth Bank’s stoppage of “pricing discounts for investment home loans.”
4. Protection of investors
The crackdown on investment loans is not just for the benefit of banks but also for investors and the home loan market as a whole. The stricter lending rules will allow banks to scrutinise applicants more and prevent writing off loans which cannot be paid off in the long run.
5. Better manages the pace of housing investor growth
The pace of credits and property investments is growing faster compared to the threshold. If this cannot be mitigated than the housing market cannot be sustained.
Looking for a good mortgage broker in Sydney?
All these changes can affect your goals to be a property owner. It is always best to talk to a good mortgage broker to make sure you can still invest in the property and achieve your short and long term financial objectives.
Our Tradebusters Connect Top 3 Local Choice can connect you with an experienced local mortgage brokers near you today.
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