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There were many lending changes in 2009, here are a few that I feel will affect property investors most:

• Lenders tightented their policies on lender and reduced loan-to-value-ratios (LVRs) ie requiring larger deposits and in most cases proven savings of at least 5% of the purchase price proven over 3-6 months. However for current clients some lenders like CBA and Westpac will still consider 95% loans, so if you have held a credit card for more than 6 months with one of these lenders you should consider keeping it. Or maybe you might consider opening a savings account with them so that you can lend to a higher LVR in 6 months time. Something to ponder.
  
• The mortgage insurers who provide services to over 90% of mainstream lenders have introduced additional policy requirements with far-reaching changes. And incidentally increased their premiums in most cases more than 20%. Just one of these changes was that they require recent BAS statements for LoDoc loans, meaning in essence that the LoDoc loan has had its day.
  
• In my mind, one of the most significant changes for property investors is the change to policy on cash-out. As property investors, many of us use a cookie cutter approach ie once one property rises in value through buying well, capital growth, renovating or a combination of all three we then draw equity to buy the next property.
  
  However, in the last 3 months many lenders have put significant restrictions on accessing this equity. For instance, some lenders now restrict cash-out to 20% of the property value, or they require a letter from your accountant or financial planning stipulating where the funds will go. No longer can your reason for accessing equity be for “future property investment’. In some cases, lenders are asking for a contract of sale before they will release the funds and others are requiring you to service the new debt through them as well, even if you are getting funds from another lender. Or if you say that the funds are for renovation they require a signed contract from a registered builder for any works over $20,000.
  All indications are this is going to get tighter and tighter, so if this your strategy then you may want to consider building up your cash reserves now. Incidentally, the case for LoDoc lenders is even worse with some lenders restricting cash out to $20,000


The changes have not stopped. This week Westpac announced that they are reducing their max LVR for new clients to 87% including mortgage insurance from 92%. RAMS (owned by Westpac) have followed suit and made a further shocking revelation that from 26th Feb 2010 they will exit 'mortgage broker introduced loans'. As one of the lenders with a very generous servicing calculator, ie you can borrow more than most other lenders, this will be a blow.

While changes will continue to happen, the key is having a strategy to minimise any affect on you. This might include having an exit strategy based on certain eventualities or even acting now to shore up your position.

We will keep you posted of future changes and their implications.

Living off one income when you’re used to two can be a real challenge and takes time to adjust to. To help make the adjustment, you can look at options that help get your budget to work more cost effectively for you:

1. Changing your mortgage repayments from Principal and Interest payments to Interest only.
   
2. Review the level of insurance you have, or move as much insurance as possible to your super fund. Professional assistance should be sought from your Financial Planner to ensure it is done appropriately.
   
3. Review all automatic transfers, including subscriptions and reduce (or stop) the automatic salary sacrifice to super.
   
4. Set a maximum dollar figure for all birthday and xmas presents.