The Reserve Bank is tightening the screws on property investors. Graham discusses exactly what this means.
The new rules state that you now need 40 per cent equity to buy an investment property and if it’s a new build (as an investment) then you only need 20 per cent. So, what are the implications? Basically, heaps.
The only good news is that it is kind of too late to do anything about it. Banks are honouring existing pre-approvals at 80 per cent for investment properties but under duress and are looking for any opportunity to get out of having to do so. Why? Because The Reserve Bank will be severe in their punishment of any bank that doesn’t comply with the new enforced ratios.
It all emphasises the need for property investors to put even more thought into their purchase or building decisions and to keep a close eye on those debt-to-equity rations. Getting clarification around what proceeds you will actually end up with is imperative. If you have multiple properties, the banks will retain as much of the proceeds as possible to get the new ratios in place.
What does this mean? Check out the video in this Spin edition for clarity or check out our YouTube account: What banks do with investment property sales.
Graham Goodisson is a Registered Financial Adviser with Velocity Financial. No investment decision should be taken based on the information in this blog alone. A disclosure statement is available free of charge upon request.