InvestKit

As a Newsletter member you also have access to the InvestKit containing easy to use spreadsheets for researching and locating the right property.

If you haven’t yet looked inside the Invest Kit to see what’s on offer, don’t delay because you could be missing out on something that will make a difference to your investment strategy.


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Recent Changes to Lending Policies

In the last few weeks there have been significant changes to the way banks hand out their funds and assess how we are eligible to receive them.

The lenders are taking the opportunity to reduce their risk. On top of this, the major lenders are indicating that they will not be passing on all of the future rate cuts.

As a fall-out of the current credit crisis most applicants want to stay with one of the major lenders. However with this huge increase in business the major lenders have - in the last 3 months - consistently displayed unacceptable timeframes in assessing applications and have also changed their policies and requirements whilst applications are in the process of being assessed. The 'non-major' lenders are still assessing loans within 48 hours (not 12 days as St George was and 7 days as CBA currently is). These 'non-majors' have kept current lending policies and passed on all interest rate reductions.

Here is a selection of recent lender Policy Changes:

CBA

Professional Packages
CBA announced that from 22 March they will no longer offer the same discounts on lending that they have in the past for their Professional Packages. Existing discounts will be honoured.

Previously any loan portfolio over $250k received a 0.7% discount. They have now removed their special discounts and their underlying discounts will prevail.

$150,000 - $350,000 0.5% off standard variable rate
$350,000 - $750,000 0.6% off standard variable rate
$750,000 and above 0.7% off standard variable rate

This marks a major change in professional product discounts, especially if other lenders follow suit.

Lo Doc lending
CBA now requires 24 months ABN registration, 12 months GST registration and you must also submit your last 12 months of BAS statements.

Non Genuine Savings
This is one to watch. It has not been communicated as yet but it may just be a matter of time. Previously an applicant could use the FHOG as their deposit for a property. Now an applicant MUST prove they have saved 3% of the deposit themselves.

Westpac

Non-Genuine Savings
This week they have released many changes to their policies. In my mind, one of the most significant of these is: if you are borrowing more than 80% and you have non-genuine savings (genuine savings is proof by way of bank statements of having accrued 5% over 3 months) then you have to have a P&I loan, Interest Only loans are not permitted.

Loan to Value Ratio (LVR) restrictions
- Maximum LVR for refinances from other lenders is 90%
- 85% No LMI loan no longer exists
- Max LVR for a Line of Credit is now 90%
- For any loan with a LVR greater than 90% the maximum loan is now $500,000 and there are restrictions on certain postcodes

ANZ

Cash Out Restrictions
Traditionally investors have refinanced their properties periodically to tap into the growing equity. They do this for the purpose of using this 'cash out' as a buffer for the future, or for a future property purchase, or living expenses.

Officially ANZ has no cash out restrictions at any LVR. However assessors have started asking for evidence of the purpose of the cash out. The days of being able to easily access equity from your property portfolio are fast coming to an end.

LVR
ANZ is the first lender to change their maximum LVR to 90% from 95%.

St George
Lo Doc lending
Cash out is now restricted to $10,000

No Deposit Home Loan
- Owner occupiers must pay P&I
- Applicants need to demonstrate that they are meeting no less than 40% of the proposed loan repayments through a combination of: rental payments or additional voluntary contributions into a superannuation fund or paying off an existing loan
- LMI capitalisation is available up to $500K.

So what does this mean?
For one thing if you are buying a home requiring a 95% LVR loan and you can not show 5% of the purchase price as genuine savings in a bank account over 3 months, and you would like an interest only home then the Big 5 Banks will no longer have a loan product to suit. Increasingly those buying their first home see their first purchase as a stepping stone and not the home they will retire in. Hence those in this situation don't want to pay off unnecessary principal payments.

For investors, cash out and Lo Doc restrictions requires a rethink of strategy for the long term.

What is LVR?
Check out the Newsletter archive from March 07, this will explain this term an a few others that you may find confusing.

Back to Basic March 07 Newsletter

What to look for when inspecting a property

HANDY TIP
Property expert, Dolf de Roos suggests you need to look at 100 properties (ie physically walk into them) before you end up buying one. With the many investment properties I have, I would have to agree this has been my experience. However the good news is that you will gain invaluable experience putting in offers and understanding the market along the way.

With that in mind, the most important thing is that you understand what you are looking for and you have the notes to remember each property you have inspected.

To make this easier for you I have developed a number of spreadsheets for this purpose and you will find them in the InvestKit. Start with the Property Feature Checklist, which is invaluable if you are looking to buy with another person. Can you imagine wasting a day driving around looking at places only to find that your buying partner would never consider buying a place without a spa bath/dishwasher/shed/garage etc. Start off on the right foot and complete this sheet before you look at anything.

Then once you know what you are looking for. Start looking. Use the checklist to note down all the details of the property such as the number of powerpoints in each room and so on. After a while you won't even need to think of these pointers as they become second nature. However having all these details together in one spot can make a big difference. Here is an extra tip: staple the property flyer to the sheet, this way you will have all your info together and when you're ready to make a move you'll have a head start.

Happy Hunting and remember if was easy everyone would do it.

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