This article is particularly relevant to investors deciding on buying a property off the plan with a settlement date some time in the future.
First some background.
The Reserve Bank and APRA have been concerned for some time about the growth of interest only loans being funded by the lenders and at first glance this suggests borrowing for investment property purposes. That is still true however an increasing number of owner occupier loans are also being written on an interest only basis. The concern of course is that if the there is a marked drop in property values, particularly in Sydney and Melbourne, then those loans that do not have any principal amortization are more at risk.
To ease their concerns APRA has advised all lenders to limit the growth of their investment property loan portfolios to no more than 10% per annum .So what you might say. How does this effect buying off the plan?
Let’s look at a hypothetical scenario.
Suppose you made an offer for an off the plan apartment with a settlement date 24 months in the future and suppose the lender gave you a conditional approval; and it will only be a conditional approval. Under normal circumstances you can sit back and wait for say a month or two before settlement at which time you have to revisit the lender to sort out the funding side of the purchase. And when you do pay them a visit they apologise profusely and advise they are up to their 10% growth and regrettably can’t help you notwithstanding their earlier conditional approval.
What now? You’re under contract to buy a property that is due to settle in the near future and the lender has just told you they can’t help.
Another lender? Yes, but which one?
Which one? Give us a call at Select and we’ll know which lenders have room in their portfolio. We’ll put your application together and submit for you. Go on, pick up the phone.
Australian Credit License No. 377093
