How have lending conditions in Australia changed?
There continues to be plenty of change in lending conditions in Australia, which particularly affect overseas-based borrowers. Here are some key changes you should take note of:
Banks have tightened how they calculate your loan servicing capacity (the ability to repay a loan), which can significantly affect the amount of loan you would qualify for. These rules are especially harsh on investors and offshore owners.
As such, you cannot assume that you will automatically qualify for 80 percent lending. Even though you may have the required deposit, the servicing calculations may impact your level of approval and reduce the loan amount.
If you commit to a property without a “subject to finance” clause, you may place your deposit at risk if the approved loan amount is not as much as you require. Seek out a lending assessment or pre-approval with the SMATS Group finance team prior to commencing your search to be fully aware of your options and make a safe, sensible acquisition.
Many people have successfully built equity in property through value appreciation or debt repayment, which has traditionally been relatively accessible for further investment. It has become increasingly difficult to arrange these loans, as banks are now more diligent about the use of funds to protect their lending position.
However, it is not impossible. The SMATS team can help you weigh your options if you are considering accessing some equity for further investment, property acquisition, refinancing a personal debt or lifestyle expenses.
Although the Reserve Bank of Australia has not changed the official interest rate since August 2016, Australian banks have been increasing investor loan rates on their own accounts.
Owner-occupier rates have remained largely unchanged at record-low levels. In addition, loans where the repayments are only for interest are now being charged at a higher rate than loans that are reducing the principal. Some banks have also taken it upon themselves to charge a premium on overseas-based borrowers, although this often does not apply if the client is an Australian citizen or holds a permanent resident visa.
If you think you may have been wrongly charged for this, contact the bank as soon as possible to rectify the mistake, or make an appointment with SMATS to confirm your arrangements.
From The Finder (Issue 286), September 2017
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