Another consideration is that switching to resi finance can potentially give you a higher maximum LVR on the property – should you want to draw from the equity in the future.

• This reply was modified 9 years, 4 months ago by  Corey Batt.

Jamie Moore wrote:

Hey Mandy

Not using a trust isn’t the end of the world – in fact, it’s not even that common these days. The vast majority of my clients don’t use them – I’ve never personally done so either.

As for risk mitigation – make sure you’ve got some good insurances in place (as you’re already aware).

Cheers

Jamie

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I can say the same about the clients I see – a minority are using trusts and when they are it’s primarily for tax than asset protection.

Consider the possibility of litigation against yourself when you hear people spruiking constantly about asset protection. There’s a very different risk metric for a surgeon vs a public sector customer service officer!

A lot of clients are riding the rates down at the moment, not all that long ago people were clambering for 5% five year fixes – which are not 0.5% cheaper again.

Fixing should be used as a risk mitigation in having consistant repayment figures – anything else is a gamble.

If you’re reducing to 4 on 1 title can certainly get it refinanced as a residential loan, we put quite a few of these through each year.

Jacqui has touched on an important consideration in that you carefully make sure the end result will be a better investment.

Good luck!

Jamie Moore wrote:

ING just announced a lending cap of 80% LVR on all NSW properties :-(

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Localised policy changed – to be honest I see that as a much healthier response than blanket restrictions for Australia wide!

DeanCollins wrote:

Richard Taylor wrote:

Corey is correct about pre-approvals.

I had 2 forum clients ring me on Friday to ask me how they would go with their OTP purchases which were supposed to be complete by the end of this year. Regretfully had to tell them as it stood they would not qualify.

I am sure there will be many more clients in the same boat.

So is this going to be enough to take the steam out of the Sydney market?

Based on this weekends auctions I’d say not but as I’m just about to buy next IP …would prefer not to be buying he month before everyone decides yeh we are over paying….

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I’ve been of the mind that Sydney has already hit it’s effective peak – considering we’re hitting equilibrium in the ‘further boom’ vs ‘property bubble’ talk in the media, industry related commentary etc. We may see a further spike in the meantime, but it wouldn’t be surprising to see a minor correction over the forward period.

APRA’s fiddling will only play further into this – if the data shows a slow down in lending growth we may be saved from further intervention.

Meanwhile other healthy markets are getting hit from the excesses of NSW – we may see further localised policy such as ING’s just released (max 80% LVR for NSW properties).

Jamie Moore wrote:

Nab and Advantedge have announced their changes today.

On the surface – they don’t seem as drastic as changes implemented by other banks such as AMP and Macquarie.

They’re applying a “loading” to debt held with other lenders rather than assigning an assessment rate of 7% + on P&I terms.

Cheers

Jamie

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Their calculations based on todays announcement should still make them a competitive player, however their slight adjustments to investor vs owner occupier interest rates isn’t that thrilling.

Stephen wrote:

Ian, unfortunately the property still hasn’t sold. I’d prefer not to name the agent publicly.

Corey, risk has been mitigated by using 12 month leases that end in the peak period for new students, and rent payments 4 weeks in advance.

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Vacancy is just one of the risks. Other factors include increased wear and tear, potential downturns in student accommodation requirements (similar happened in Newcastle, where the campus built their own accommodation facilities for students and wiped out the private market), increased churn in tenancies compared to a standard residential lease etc. All these factors play into the pricing, compared to a single freestanding property with a single lease generating a similar ~9% gross rental.

Some very large fundamental shifts in the policies of the lenders at this time – spending a lot of time with clients at the moment reviewing their situations so we can ensure we will meet their goals moving forward. Pre-approvals with a number of lenders aren’t being honoured with their new policies in place, which will make for awkward times for some investors.

I’d stress the importance to anyone here to show some prudent planning with their financial strategies at this time, otherwise some very simple costly mistakes will slow you down on your property journeys!

The valuer will 99.9/100 revert to the purchase price at sale, even if they believe the property is at a higher value. There is no effective benefit in you trying to achieve a higher value at the contract date, as lenders will take the lower of the two values – as Kinnon has touched on.

In practical terms, after 6 months you can order another valuation, by which time the valuer will be more likely to value the property on the comparable sales in the area, than referring the recent sales price.