Property investment loans have changed a lot in the past months. What do the changes mean for buyers? Can you still break into the property investment market?
APRA (the Australian Prudential Regulation Authority) works to protect consumers in the property market. To encourage investors to diversify their investments, APRA set a 10% maximum growth limit on residential investment mortgages.
However, the as big banks were pushing or exceeding this limit, in May last year APRA stepped in. The idea is that if property investment loans are growing too fast, investors are more likely to risk everything on a single investment, rather than spreading their investments out.
As a result, many lenders have now changed their policies. Broadly speaking, the changes mean you now have to pass stricter criteria to have your investment loan approved. Interest rate discounts have been cut on investment loans, and deposits have gone up by as much as 20%. Your rental income is no longer as significant a part of your income assessment.
But this doesn’t mean you can’t get into the property investment market! The main impact is that you will need a larger deposit, because LVR (loan to value ratio) is being restricted by the banks. But despite that, don’t forget that interest rates are at an all-time low. There are still many positives for property investors, and depending on your own situation, this could be the perfect time for you to invest.
So how can you sort through all the options and nuances to find the right loan for you? It can be tricky, especially as each financial institution only provides information about their own products. The lending environment has grown more complex, and so it is more important than ever that you have a good financial adviser at your side.
Whether you need a new loan, think it’s time to refinance or simply want to be sure that your current loan is working well for you, a chat to your finance expert is always a good move. If you want to know more about navigating the ever-changing world of finance, contact us today.