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How do the changes to investment lending affect my existing investment loans?

LoanApplicationSmallYou’ve probably heard a fair bit about lenders toughening their lending criteria for those wanting to buy investment property.  But how does this affect your existing  investment loans for the property you already own?

It all started when APRA wrote to ADI’s (Authorised Deposit-taking Institutions – mainly banks, credit unions and building societies) last year, after completing a review of these institutions. APRA was concerned by the significant growth in the number of investment loans and advised lenders they needed to take steps to limit it.

In response, lenders are tightening their lending criteria for investment borrowers.

To date, some of the changes mentioned include:

  • Reducing the maximum loan-to-valuation (LVR) ratio for new investment loans
  • Reducing interest rate discounts offered on new investment loans
  • Changing the qualifying criteria for new investors to receive interest rate discounts
  • Increasing the loading buffers that apply to serviceability assessments (this has the effect of reducing maximum borrowing capacities)
  • Removing rebates or special ‘cash-back’ offers to new investors
  • Requesting additional documentation from borrowers when they apply for new investment loans
  • Toughening the lending criteria for non-resident borrowers
  • Tightening restrictions around lending to self-managed super funds

Obviously not all changes will apply to all new investment loans since lenders are selecting specific measures that fit with their existing practices.  But the lending environment is definitely changing.

Changes apply to future loans and will not affect the arrangements of your existing investment property loans.*

However, if you’re planning to purchase investment property soon, or you’ve already exchanged on an ‘off-the-plan’ investment property purchase, these changes may affect you and your borrowing options with particular lenders.

To find out how, contact us today.

* Please note there have been some developments since this post was written – there are now changes that may affect your existing loans.  You can read about this here.


 

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