The NAB group of Companies have announced effective 12 Dec they are once again tightening the serviceability screws.
They are introducing an amended Living Allowance scale which is progressive based on the borrowers level of income (More expensive for a single person on $150K than one on $90K) and more importantly changed how they assess external debt.
In the past NAB and their spin offs (i.e NAB Broker, Advantedge, UBank etc) have taken the actual debt and applied a 28% loading to the interest rate which in many cased worked out better than a flat 7.4% P & I.
They are now moving to a calculation based over the remaining P & I term i.e if you have a 25 year investment loan with 5 years interest only the external debt will be worked on a 20 year P & I repayment.
Obviously this reduces the amount an investor can show they can service and appears to be another over reaction.
Cheers
Yours in Finance
0-40 Properties in a decade. Ask me how.Richard Taylor | Australia's leading private lender
There goes one of the last remaining “generous” servicing calcs :-(
It’s becoming harder and harder to own multiple properties these days. I don’t know how it’s going to be possible when/if rates go back up.
Cheers
Jamie
Jamie Moore | Pass Go Home Loans Pty Ltd
http://www.passgo.com.au
Email Me | Phone MeMortgage Broker assisting clients Australia wide Email: [email protected]
Us investors are resilient like cockroaches we will survive. These changes #iss me off because its the first time investors that will struggle to become successful.
Us investors are resilient like cockroaches we will survive. These changes #iss me off because its the first time investors that will struggle to become successful.
Absolutely – especially if you’re on an average income. I’m even seeing some clients on high incomes hit a borrowing capacity wall early because of these changes.
Jamie Moore | Pass Go Home Loans Pty Ltd
http://www.passgo.com.au
Email Me | Phone MeMortgage Broker assisting clients Australia wide Email: [email protected]
Us investors are resilient like cockroaches we will survive. These changes #iss me off because its the first time investors that will struggle to become successful.
Absolutely – especially if you’re on an average income. I’m even seeing some clients on high incomes hit a borrowing capacity wall early because of these changes.
Exactly – I’ve seen a surge of business coming from borrowers who previously went to branch for all their lending but are being told NO MORE. It’s getting harder and harder for someone to blindly stumble their way to success with the screws being tightened so much.
Corey Batt | Precision Funding
http://www.precisionfunding.com.au
Email Me | Phone MeInvestment Focused Finance Strategist - servicing Australia-wide
How does the “Living Allowance scale” work?
Shouldn’t people who have little personal ‘non investment debt’ (eg scrimpers like me who invest a lot of post tax earnings) be judged on actual debt and not “ordinary disposable debt based on total salary” norms?
Reconfiguring it so that loans are P+I @7.25% is fine (and probably prudent considering what possibly could happen over the next 10 years).
Basically it means you can just rely on capital growth to ‘ease your way out” of leverage……based on how its projected to grow also not a bad idea.
The idea is that those with high incomes will generally have higher living standards/expenses. It’s more likely they will have more expensive private school costs, cars, holidays etc.
Yes some people may be tight with their money in any income bracket, but the financial system is meant to work on the majority for stability, than individuals.
Corey Batt | Precision Funding
http://www.precisionfunding.com.au
Email Me | Phone MeInvestment Focused Finance Strategist - servicing Australia-wide
@corey, thanks for the tip. Interesting thinking….wonder if it will cost NAB some profitability…..
BTW is it just me or are other people really missing the Thumbs Up/Thumbs Down feature :(
@corey, thanks for the tip. Interesting thinking….wonder if it will cost NAB some profitability…..
BTW is it just me or are other people really missing the Thumbs Up/Thumbs Down feature :(Just about all the lenders are having to review their living expenses calculations, so this style of calculation will most likely become the norm in the near future – so I doubt it’ll be a localised issue for NAB. They still maintain one of the higher borrowing policies for borrowers with existing debt with other lenders.
Corey Batt | Precision Funding
http://www.precisionfunding.com.au
Email Me | Phone MeInvestment Focused Finance Strategist - servicing Australia-wide
In the past NAB and their spin offs (i.e NAB Broker, Advantedge, UBank etc) have taken the actual debt and applied a 28% loading to the interest rate which in many cased worked out better than a flat 7.4% P & I.
They are now moving to a calculation based over the remaining P & I term i.e if you have a 25 year investment loan with 5 years interest only the external debt will be worked on a 20 year P & I repayment.
Obviously this reduces the amount an investor can show they can service and appears to be another over reaction.
Cheers
Yours in Finance0-40 Properties in a decade. Ask me how.Richard, I haven’t used NAB Broker for a while but the way I read their policy, the external debt is still assessed the same as before, and it’s only proposed new borrowings that are affected by the new servicing calculation based on remaining P&I term (confusing I know). The new serviceability calculator still adds a loading of 28% to existing debt so it seems it may be the case.
Cheers
Tom
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This reply was modified 8 years, 11 months ago by
PLC.
In the past NAB and their spin offs (i.e NAB Broker, Advantedge, UBank etc) have taken the actual debt and applied a 28% loading to the interest rate which in many cased worked out better than a flat 7.4% P & I.They are now moving to a calculation based over the remaining P & I term i.e if you have a 25 year investment loan with 5 years interest only the external debt will be worked on a 20 year P & I repayment.Obviously this reduces the amount an investor can show they can service and appears to be another over reaction.CheersYours in Finance0-40 Properties in a decade. Ask me how.
Richard, I haven’t used NAB Broker for a while but the way I read their policy, the external debt is still assessed the same as before, and it’s only proposed new borrowings that are affected by the new servicing calculation based on remaining P&I term (confusing I know). The new serviceability calculator still adds a loading of 28% to existing debt so it seems it may be the case.
Cheers
TomCorrect – so not a major issue in the scheme of things.
Corey Batt | Precision Funding
http://www.precisionfunding.com.au
Email Me | Phone MeInvestment Focused Finance Strategist - servicing Australia-wide
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This reply was modified 8 years, 11 months ago by
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