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Thursday, December 21 2017
What every investor needs to know about their loans

This is why you need to relook at your investment loans.
 

"There are still investment rates starting from 3.74%".

It has been a testing time for property investors in the last 48 months as lenders have been shifting the goal posts in response to pressure from the Australian Prudential Regulation Authority (APRA) and ASIC.

To comply with these pressures many lenders have had to introduce a raft of changes including:                                                                                                


 

  • Increased interest rates for investment and interest only lending
  • Increased equity or deposit requirements for investment lending
  • Tighter conditions on loan servicing
  • A closer examination of living expenses
  • Withdrawal or substantial restrictions on overseas buyers including ex-pats
  • Restrictions on property types and properties in certain postcodes
  • In some cases, stopping investment lending altogether


The net result of these changes has seen many investors stuck on higher interest rates with their current lender with no room for negotiation. In many cases on rates well above 5%.

But you can take a number of steps to improve your situation.

There are still competitive investment rates available
The changes have affected different lenders differently. At the time of writing there were still investment rates starting from 3.74%.

An investor with $750,000 in lending on a 5% interest rate could save approx. $9,450 per annum in interest.

Look at principle and interest (P&I) repayments
Better pricing is now skewed towards reducing loans rather than interest only. Restructuring some of your investment lending onto P&I may now make more sense. I have had a number of clients where we have reviewed their situation and for no increase in repayments they can put some of their investment lending into reduction which will increase their equity in their property and reduce their long term borrowing costs.

Fixing may also be an option
There are some better rates in investment space for fixed rate lending at present. With rates at historical lows it could be worth locking in some or all of your investment lending.

Don’t limit your thinking to investment lending
There are also savings to be had on the home loan front with some very low rates available. Refinancing your home loan and also looking at debt consolidation are further steps that could reduce repayments and free up cashflow.

Don’t forget the fees
Many loans particularly loan packages have ongoing fees of up to $400 per annum. Getting a lower rate plus getting onto a new loan with no fees could end up saving you a couple of thousand dollars a year.

Have your switching costs covered
Some lenders will offer cash bonuses for bringing your lending to them. In many cases this bonus will offset the cost of switching meaning you can get onto a lower rate at no cost.

Cash positive property
If you have a cashflow shortfall in your current investment mix then adding a cash positive property to your portfolio might be a sensible move. The surplus cashflow can either offset existing holding costs or be channelled into other debt reduction. A recent option for a client is generating over $6,000 a year positive cashflow after all costs.

Have your situation reviewed
In many cases we have identified savings of $3,000 a year or more for clients. In some cases, we have even identified savings of more than $10,000 a year.

To have your situation reviewed is easy. Just click on the button below to arrange an initial telephone appointment with me and let's start saving you some money.

Schedule Appointment

Greg Carroll
MORE THAN ACCOUNTANTS
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Tuesday, December 19 2017
Costco Ipswich expected for late 2018

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