Sydney property prices are sky rocketing due to lowered interest rates and governing bodies are worried about people getting caught out with their pants down once interest rates start going back up again.
Therefore, there are some changes that are taking affect that you need to be aware of, for your own property investing journey. After all, a good investor is one that is informed, knowledgeable and thinks about the future.
This is why we asked our friends at Zinger Finance to help explain what’s going on in the industry in a simple to understand way (hopefully!).
Zinger Finance is a part of the Binvested.com.au group of companies. The finance specialists in the company have been single handedly picked by Nathan and Daniel based on their property investing loan writing experience. Combined, the team has 50 years of experience in the industry and are also generally booked out with clients months in advance.
We know this update is a bit longer then what you’re used to receiving but make sure you read through it till the end as its very important!
HOW WILL I BE AFFECTED?
The Finance/banking Industry are implementing changes under the directive from APRA (Australian Prudential Regulation Authority) to rein in investment lending which you need to be across because you may be negatively impacted by these changes.
Most banks have already introduced these changes and others have some in the works.
A lot of these changes will currently only affect new loan applications (mainly property investor applications) which is why you may not have heard of them…but they are definitely there, so beware!
If you are intending to apply for finance in the near future then this is definitely something that you should be aware of because now it’s more important then ever to have your loans structured correctly for now and the future.
Why?
Max out borrowing capacity sooner – If you aren’t set up correctly, banks may not want to lend to you or they may make you wait longer before they are willing to look at your application.
Sell assets to repay debt – If you’re in the wrong loan and things become tight you may be forced to sell assets in order to repay debt…think about all the hard work you’ve put into your portfolio so far and then having to sell it off to pay the banks back…um, no thanks! That is definitely something you want to avoid.
More out of pocket – You may need to add more of your own funds for bigger deposits which in itself might slow you down from growing your portfolio and reaching your goals.
Limited choices – Your choice of lenders may become limited and your range of options may become limited with some lenders not being able to help you.
Be more selective on the properties you buy – You may need to be more selective in regards to the properties you buy. For example, having a positively vs negatively geared property – some lenders might take negative gearing into account and others may not.
Impacts on your lifestyle – These changes may force you to consider some lifestyle changes ie. being more tight with cash or being able to show some type of ability to save.
WHAT’S CHANGING?
All lenders are reviewing their lending practices and some of them have responded with the following changes:
Higher interest rates – higher pricing for investment loans either in the standard pricing offer or through removal of discretionary additional discounts for investment loans.
You should not be able to borrow heaps more from one bank vs another given the same scenario – changes to serviceability assessment and calculations of maximum borrowing capacity, effectively meaning borrowing capacity will be more uniform across all lenders.
Your living expenses could be calculated at a higher rate then what you actually spend – for example, living expenses that the lenders allocate to you can now be more than your actual living expenses. This may be based on your geographical location, marital status and number of dependants.
LVR restrictions on investment loans – some lenders previously may have allowed a 10% deposit but now will require a 20% deposit as a minimum.
Capping investment portfolio – people with larger portfolios may either be capped in regards to how quickly they can grow their investment portfolio or may be directed to apply through commercial banking channels.
There are also solid possibilities of more changes to follow and not all lenders have implemented them – yet!
WHAT DOES THIS MEAN FOR MY PROPERTY INVESTING STRATEGY?
These changes are designed to rein in investment loans and therefore may slow some investors down in achieving their goals. Therefore this should cause all investors to review and rethink their current strategies.
To make sure that you are not going to be too restricted by these changes or that you can still map out a way to move forward and reach your goals, it’s now more important than ever to adopt a long term finance strategy and utilise the services of mortgage and other professionals who can assess your circumstances and offer the right advice for you to continue your investment journey and navigate the various changes.
Apply for a FREE ‘Review Session’ with Zinger Finance
HOW WILL IT AFFECT INVESTORS?
Some people may benefit from a more aggressive buying strategy to pre-empt any other possible future changes where their ability to borrow may be affected further.
It may be wiser for other investors to take a slower strategy.
Either way, please don’t delay reviewing your strategy as the changes that are coming out may seriously affect your ability to reach your end goals, such as: retiring earlier, doing what you want when you want and generally living life on your terms.
Changes will affect every investor differently. Some may be able to adopt a more aggressive approach and others may have to pace their journeys more slowly. Talk to someone who can advise you properly on what’s best for you.
Apply for a FREE ‘Review Session’ with Zinger Finance
HOW WILL THIS AFFECT HOMEOWNERS?
If you are using equity from your principal place of residence (home) to invest in property you may be affected by these changes. Generally, owner occupied loans are largely unaffected.
However, now would be an opportune time to review your home loan and make sure your home loan features are right for you in the present and into the future (for example, you may be wanting to invest later using equity from your home).
Also, check that your home loan is working as hard for you as it can be. This could be from an interest rate perspective or maybe you are getting married or having kids or changing jobs in the near future, which would mean that your lifestyle will be affected. So its important to ensure that you will be able to meet the monthly repayments on your mortgage. If you you’re unable to meet the repayments or if you need to restructure your loan for whatever reason then you want to make sure you are with a lender that gives you the ability/ flexibility to do that.
Apply for a FREE ‘Review Session’ with Zinger Finance
WHAT SHOULD YOU DO NOW?
Whether you’re an investor or homeowner or both, now is an important time for you to review your goals and review your loans with a professional to make sure you’re still able to reach them in the long run. Most importantly, you don’t want all your hard work up to this point in time, building up your assets, to be affected by the changes in the industry. Therefore, its more important now then ever to review your strategies with your property investing success team.
If you would like Zinger Finance to get in touch with you in regards to setting up a FREE goal ‘Review Session’ to make sure you’re on the right track with your finance strategy then simply click on this link to apply.
In this session they will review your personal situation and make sure you’re set up for now and into the future. However, please note that Zinger Finance have a limited number of spots available and these spots will fill up fast. So get your application in quick!
Apply for a ‘Review Session’ with Zinger Finance
P.S. If you would like to get in touch with Zinger Finance about any of your property finance needs you can also email them on info@ZingerFinance.com.au or give them a call on 1300 882 022
Zinger Finance Australian Credit Licence Number: 390261