Without a doubt, these are some of the hardest lending conditions we’ve faced in a long time. Who knows if anything will improve as a result of the election, I guess only time will tell. For now, the market is slow and banks are making it harder and harder to borrow with constant credit policy changes, meaning investors are constantly needing to strengthen their position as borrowers.
Recent changes have meant that some of the banks are looking to capture even more data from you, specifically around your existing lending. Often, this is information you may not even have to hand, so it’s worth taking note of what you will need to provide next time you go to borrow. Overall, these changes are making proving serviceability harder so you need to be doing what you can to improve your chance of borrowing again.
These changes are becoming regular and you won’t know about them until your next application, which could be as simple as requesting an interest only extension (which in itself is getting harder!).
In a market which is changing this much you really need to be using an adviser to help plan your next move.
Keep track of your portfolio
If you don’t already have a portfolio spreadsheet which you update regularly then you need to. It shows the bank you’re on top of your lending situation and puts you on the front foot. Even if you do have one, chances are it doesn’t include all the information that banks are now requesting. You’ll need to start tracking additional information such as:
- Loan start date
- Remaining term
- Interest only start date and term
Put simply, some banks will now assess your lending at principle and interest based on their test rate over the remaining term less the remaining interest only period. Sound confusing? That’s why I suggest having a decent adviser is becoming essential. Let them do the hard work for you.
Split bank
In NZ, we don’t have the luxury of having a multitude of main banks to choose from like our friends across the ditch. Even still, across our five major banks, there are enough differences to make split banking an essential part of your investment strategy. If you have anything more than three properties – and you are still looking to grow – then I would suggest looking at the option of split banking to protect yourself from unexpected policy changes.
This is a simple strategy which a lot of investors choose to ignore until it’s too late. Unfortunately, some advisors still don’t do this for their clients which is mind boggling.
Essentially, as a result of policy changes, banks are looking to capture as much information as they possibly can in order to fully assess the risk of lending to you. The changes are becoming fairly regular and they’re significant enough to impact your next move. So, give us a call and get our advice before moving forward. Even if you’re just looking to refix, because even that isn’t as straight forward as it once was.