Loan to Value Ratio LVR – why is my home loan LVR important?

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Loan to Value Ratio (LVR) – is it important for my home or investment property purchase finance or refinance?

 by Nigel Abery (PhD), Principal Mortgage Broker at Oak Laurel.

What is LVR?

“LVR or LTV is the acronym for loan to value ratio. Loan to value ratio is the finance or banking term used to describe the ratio between a loan (or mortgage) and the asset being held as security against that loan. Loan to value ratio is usually described as the loan as a percentage of the asset value.”

Why is LVR important?

The Loan to value ratio of your home or investment property and mortgage is important when the bank or lender assessed your loan application (including when you are taking out a new loan or refinancing your existing loan). Banks and lenders consider that the greater the proportion of the property that is being borrowed (up to a certain point) the the higher the risk  that they will not get their money back in the event of the borrower defaults on the loan. Generally banks and lenders will allow up to 80% of the property price to be borrowed by PAYG employees without requiring lenders mortgage insurance. Lenders mortgage insurance can cost you (the borrower) thousands of dollars and it insures the bank against you not paying the loan.
Some lenders will also self insure for some borrowers that they consider low risk. Certain banks and lenders consider your profession as a criteria in assessing risk and will waive the lenders mortgage insurance requirements for certain professionals.
The type of property you are borrowing for can also influence the loan to value ratio that the bank or lender will accept. For example if the property is an farm greater than 150 ha many banks will not lend more than 70% of the property value.  Also, recently some banks consider different suburbs as higher risk and will only lend to 70% or 80% of the property value in those suburbs.

See more here about: How to calculate your Loan to Value Ratio

Oak Laurel Mortgage Brokers – Home loans made easy!

Is Melbourne overtaking Sydney as the hottest property market? Aug 2015

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Property price growth data shows that in the last Quarter, Melbourne property has out paced Sydney’s to become Australia’s hottest property market as at Aug 2015

Property price growth in Melbourne and Sydney

Latest property price data from PRData shows that in the last quarter Melbourne property price grew 7.85% out pacing Sydney price growth at 6.66%. Month on month price data also shows a similar trend, Melbourne price growth outpacing Sydney’s, overall and for houses. Though Sydney’s unit prices grew faster than Melbourne the difference was only 0.06% between the two or in practical terms they were the same.
In recent years Melbourne has shown some reasonable price growth but until the last quarter have been outpacing Melbourne’s by a large amount. With Sydney’s property prices now so high many believe that they are unaffordable. There have also been reports that property investors looking to buy in Sydney have been turned off by the high prices and are now turning to Melbourne where prices have been rising at steady pace. Now that Melbourne’s price growth appears to have overtaken Sydney’s investors chasing capital gains may also be more attracted to Melbourne.
Melbourne property has not had the attention from property investors that Sydney has had with a larger proportion of owner occupiers. However, if investors now find Sydney too expensive or decide to target Melbourne which has in the last quarter become the hottest property market, this may be the start of a flood of investors to Melbourne property.

Auction clearance rates in Melbourne and Sydney

Recent auction clearance rates show a similar trend to the property price growth in Melbourne and Sydney. Over previous five weeks Melbourne’s auction clearance rates have shown a steady building increase from 74% five week ago to 75%, 76% , 77% to 80%.  Sydney’s auction clearance rate though having 80% last week have showed a decreasing rate previously from 78% five weeks ago to 76%, 76%, 73% before last weeks jump back to 80%.

Is Melbourne a good place to invest in property?

Invest where people want to live, especially where people who have wealth want to live as this is the demand side of what drives up property prices. People want to live in Melbourne. Melbourne has been named the world’s most liveable city for the fifth year in a row, achieving a near perfect score on the Economist Intelligence Unit’s (EIU) liveability survey of 140 cities. Each year thousands more people move from NSW, mostly Sydney to Victoria, mostly Melbourne than go the other way. Melbourne has the greatest number of people immigrating to it than any other Australian city. The ABS forecasts that given current levels of migration and fertility rates, Melbourne will overtake Sydney as Australia’s biggest city by 2053.
It is not all Melbourne’s way though. Vacancy rates in Melbourne at 2.3% are however, slightly above that in Sydney at 1.8% as of July 2015, according to SQM research data. However, both cities have lower than the national average vacancy rate at 2.4%.
Latest data also shows that rental yields are also slightly lower in Melbourne than in Sydney.

Conclusion

This data does not mean that Sydney’s property prices will not continue to grow, there is every indication that the it will continue to grow into the future. The data does suggest that Melbourne is now the hottest property market and may catch up to Sydney over the coming years.
Only time will tell if Melbourne will continue to be Australia’s hottest property market!

Want to talk to one of our Melbourne based mortgage brokers?

We have mortgage brokers around Australia. Do you want to talk to one of our mortgage brokers in Melbourne? Click here:

Melbourne based mortgage brokers

Want to talk to one of our mortgage brokers in Sydney?

Contact our Sydney based mortgage brokers to discuss your mortgage needs whether it is for an owner occupied property or investment property. Click here:

Sydney based mortgage brokers

Oak Laurel Mortgage Brokers – Home loans made easy!

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95% Investment property loans; 90% LVR Investment loans

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95% Investment property loans; 90% LVR Investment loans: What is the maximum loan to value ratio for investment property loans – July 2015

NOTE: Bank policy is now in a state of change this information is only valid at the time of writing 29 July 2015.
Bank policy has been changing recently. Some banks have stopped lending to investors. Others banks have reduced their loan to value ratios available on investment property lending and or increased their interest rates for investment property lending. There has also been changes to the serviceability calculators used by banks and lenders that reduce borrowing power in many cases.
We have been getting inquiries from property investors asking:
“Is it still possible to get investment property loans at 90% loan to value ratios (LVR / LTV)?”;
“Can I get an investment property loan with 10 percent down?”
“I have bought ‘off the plan’ can I still get a higher loan to value ratio investment loan?”
“What is the maximum investment property loan to value ratio available now”
“Will I need to pay much higher rates on an investment property loan now?”
Whilst many lenders have changed their policies other lenders have not, well at least not yet.

Is it still possible to get investment property loans at 90% loan to value ratios (LVR / LTV)?

It is still possible to get investment property loans to 90% loan to value ratio (LVRs) from some lenders. However, the number of lenders offering 90% loan to value ratio investment property loans are much less than before.

Is it still possible to get 95% investment property loans?

Yes, it is still possible to get investment property loans at 95% of the property value (LVR). However, because bank policy is changing rapidly it is advisable that you contact us immediately before this situation changes.  Contact us now for a 95% Investment property loan!

What is the maximum investment property loan to value ratio available now?

The maximum investment property loan to value ratio available is currently 95% LVR. Many lenders have stopped offering 95% loan to value investment property loans but some lenders are still offering these high LVR loans for investors. This lenders are generally not deposit taking institutions that are regulated by APRA. Instead they are regulated by ASIC. However, it is likely that in the near future ASIC may pressure these lenders to also reduce investment lending and they will also introduce policies similar to those of the major banks. Contact us now for up to a 95% Investment property loan!

Can investors still get competitive interest rates for investment property loans?

Yes, investors can still competitive interest rates from some lenders it is advisable that you get your investment property loan approved as soon as possible to avoid a nasty surprise when shopping for low interest rates for investment property lending.

I have bought ‘off the plan’ can I still get a higher loan to value ratio investment loan?

If you have bought off the plan and you are settling within the next few months you may want to contact us to check what options you have. Some lenders have longer periods where they will honor a loan approval before settlement. Contact us now for a high LVR investment property loan!

Why use Oak Laurel mortgage brokers for your investment property loan?

Oak Laurel mortgage brokers have access to a wide range of lenders and wide range of loans. Some mortgage brokers only have access to a smaller number of lenders and loans this can restrict your ability to access those lenders that have policies that suit your needs, including if you are property investor. This includes those lenders that currently still offer high loan to value ratios for investment properties.

Contact an Oak Laurel mortgage broker

Don’t delay act NOW!

+614 30129662

Oak Laurel Mortgage Brokers – Investment property loans made easy!

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New investment property loan rules: who are the losers

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First home buyers buying an investment property will be big losers from bank policy changes

First home buyers buying an investment property for the benefits of rental income and negative gearing will be big losers from the new lending requirements

Why would first home buyers buy an investment property?

With prices already high in Sydney, which first home buyer can afford to purchase an owner occupied home to live in? Super rich? People who want to spend most of their income repaying their mortgage? As a first home buyer, regardless of if you are buying in Sydney or another place, it can make sense to buy a first home as an investment property. The rent helps to make the mortgage payments and negative gearing helps out at the start when there is a shortfall between the rent and the mortgage interest.

What makes it harder for FHB to borrow for an Investment property now?

With lending policies making it harder to get higher loan to value ratio loans for investment properties, now first home buyers buying an investment property must somehow find additional savings to put towards the deposit. However, in rising markets like Sydney and Melbourne, property prices are rising faster than many first home buyers can save for the deposit especially when a larger deposit is required.

So what is the answer for first home buyers taking out an investment property loan?

If the first home buyer has family that want to help and the family member has equity in their property a guarantor home loan may be a good option.
Find out about Guarantor home loans here:
Guarantor home loan

Others can still access higher loan to value ratio loans for investment properties.

Don’t have family that can help you out? Maybe you are not even a first home buyer?
Some lenders are still lending at higher loan to value ratios for investment property loans. The many banks may have cowered to the pressure of the APRA but other non-bank lenders are not regulated by APRA and are operating as usual for investors.
It will be these non-bank lenders that will benefit from APRA’s crackdown as investors seek new ways to invest with leverage.
Need a hand to sort through the maze of lenders and their ever complicated lending policies?
Oak Laurel has mortgage brokers many of Australia’s major cities (Sydney, Melbourne, Brisbane, Adelaide, Perth and more). Contact an Oak Laurel mortgage broker near you to find out what your borrowing options are in the new lending environment.
Mortgage broker in Adelaide

Mortgage broker in Brisbane

Mortgage broker in Melbourne

Mortgage broker in Perth

Mortgage broker in Sydney

Will these new bank rules stop price rises in the housing market?

No, this is not the prick that bursts a bubble. There is still plenty of demand for property in Australia both from locals and foreign investors. Property investors borrowing to buy property may get a little spooked when they walk into their local bank branch and get told ‘no’. However, smart investors will go to a good mortgage broker, like Oak Laurel, and find out that there are still lending options available.
The rules are not designed to stop gains in the property market. In fact they are in effect designed to keep the property market going strong. The measures are designed to ensure that major banks are not too heavily secured by investor loans. It will really give the non-bank lenders who are not regulated by APRA a selling point and introduce a bit more competition into the investment property loan market and home loan market more generally.

Oak Laurel Mortgage Brokers – Home loans made easy!

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