Podcast Episode 15: 12 things property investors need to know about the changing finance landscape

Real estate is a game of finance with some properties thrown in the middle.

And the finance landscape is changing in front of our eyes. 

So in today’s show I chat with finance strategist Andrew Mirams about the changing world of finance. 

Clearly there have been a lot of changes brought about by APRA in the last couple of years which have significantly changed the playing field for property investors, creating a lot of challenges.

So listen in as finance strategist Andrew Mirams helps us work through some of the difficulties of getting financing today as well as explaining the big difference between serviceability and affordability.

We also talk about what is happening with interest only loans, LVRs, and how friendly the banks are, along with how to work the banking system.

And Andrew explains what to do if the bank changes your interest only loan, financing for expats, the self-employed, and self-managed super funds.

Plus we discuss what you should and shouldn’t be worried about with the changing financial landscape.

Key takeaways from today’s show:

12 Things Property Investors Need to Know About the Changing Financial Landscape

1. Servicing restrictions have been applied and regulations are being put into place to slow down the property financing markets.   
2. The banks serviceability model takes into account how much you earn and how much you spend. Or more correctly how much you could spend, even if you don’t! 
3. Affordability – because of the current low interest rate environment, banks want to ensure you can afford your repayments if interest rates increase so they stress test your affordability.
4. Interest only loans are still available, but they’re harder to come by.
5. If your interest only loan period is up, you’ll need to reassess your options – maybe it’s time to swap banks.
6. A property portfolio is about building your asset base and having good debt is not the worst thing in the world. 
7. The same rules apply for loan-to-value ratios as have for the last few years, but they are just a little bit tighter.  
8. Sometimes it makes sense to pay principal and interest if the payment differential is not great.
9. If you are self-employed it’s harder to get loans today so having a specialist help you with financing to meet the bank’s servicing criteria is a good idea.
10. There is more scrutiny on expats. They often have to supply of evidence of their last 6-months income. The servicing requirements are quite restrictive.
11. Banks have implemented restrictions lending to self-managed super funds buying property as they were viewed as distorting the market.
12. Investors shouldn’t be worried just because the interest rates may go up a bit. There is enough regulation in place to make sure safe lending practices are me are met.

Links and resources:

• Michael Yardney
• Metropole
• Rich Habits Poor Habits
• Property Update App
• Andrew Mirams Intuitive Finance
• APRA

Quotes:

“Real estate is a game of finance with some properties thrown in the middle.” Michael Yardney 

“If you can’t get more finance, you are going to have real challenges moving up the property ladder.” Michael Yardney

“We are coming to a stage where double or even single digit capital growth isn’t assured so borrowing discipline is important.” Michael Yardney

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