Changes to Investor Loan Criteria

May 2015

Changes to investor lending means good advice is vital for your property investment strategy

The government regulator APRA has enforced the implementation of tougher lending policies among Australian financial institutions, with the view to taking some of the heat out of the market by slowing down lending to investors.

What's changing?

The major banks have announced changes to their lending criteria to property investors, which includes the scrapping of pricing discounts for investor loans and the application of tougher servicing assessments on investor-borrowers.

"The servicing assessment are designed to test how investors would cope with higher interest rates," says Tim Werner, from Bates Cosgrave affiliate, Finance Logic

"One bank has gone so far as to announce that the maximum loan-to-valuation ration for property investor loans will reduce from the long-held industry standard of 90 per cent down to 80 percent."

How will this affect investors?
The landscape for investors has changed significantly due to the number and variety of policy announcements made by various banks. The impact on investors is fairly clear - the value of the loans to investors will reduce and investor-borrowers will be paying higher interest rates for their new loans moving forward.

Speak to a broker about your options
Given the changing nature of lending to investors, a mortgage broker is the best place to understand how the effect of these changes will impact your situation or future investments.

A good mortgage broker will help you to navigate the complexities and implications of new lending policies and discount structures to ensure your investment loan structure is well positioned for the long term.

Don't forget to look at finance with a 'smart debt' perspective

With a staggering 90% of investors getting property acquisition wrong, it's worth talking to your accountant or business advisor to ensure you get the "how" of buying property right.

"As with any debt, you want to make sure it's smart, tax-effective debt," says Glenn Cosgrave, Director of Bates Cosgrave.

"If you buy property in the wrong way or within the wrong structure, it is painful and costly to get it into the right structure and there can be tax consequences. For those that reason alone, it's worth checking your arrangements with your accountant before you sign the dotted line."

Property investors with finance arrangements also do well to periodically review their loan arrangements, risk profiles and investment structures to ensure that it provides the flexibility they need.

Need more information?

Contact us on (02) 9957 4033 to discuss your property investment requirements, or download our smart debt and property investment structure factsheets.