If you are looking for a home loan for an investment property in the Rockingham area, you are going to find out that it has gotten a lot tougher the last few months. Due to changes mandated by the Australian Prudential Regulation Authority (APRA), lenders in Australia are tightening their criteria for granting investment loans.
Last year, the APRA announced that lenders would no longer be allowed to grow their investment lending more than 10% per annum. They also recommended that all lenders processing investment property loans use an interest rate 2% higher than the actual rate when testing prospects for loan eligibility.
The APRA still thinks the home investment market is growing too quickly, so they have announced a set of guidelines that should eventually have a much more sweeping effect than those from last year. These guidelines are not yet mandatory and lenders are being asked to move in the direction of these guidelines as they see fit.
What APRA Wants
APRA wants to basically abolish interest only loans for investment properties. This is to be gradual, but it will have a profound effect on the “little guy” who wants to buy a few investment properties for a nest egg, trusting appreciation to help turn a profit.
With an interest only loan, it is possible for investors to break even or produce positive cash flow, pulling in as much or more from rent than the combined costs of interest, maintenance and property management. When the principal is added in, that business model will be a lot more difficult.
How Lenders are Already Moving Towards Compliance
Since the announcement was made, there have already been some changes in how lenders are doing business. Some lenders have stopped offering discounts on investment loans and giving larger discounts to owner-occupier loans. Some have gone the other way and are writing principal and interest loans cheaper than interest only loans.
Call Smartline Rockingham Today
If you are going to invest, you need mortgage brokers who know what each individual lender is doing and can match the right borrower to the right lender. Otherwise, it could cost you thousands of dollars. To learn more, call Smartline Rockingham Today: (08) 9527 1800.
