Monday 5 October 2015

Does your lender class you as an investor?

Since APRA's crackdown on investment lending, it has been reported that tens of thousands of borrowers have sought reclassify their investment loans as owner-occupier home loans, according to Liberty Network Services Managing Director, Brendan O'Donnell.

The reason being is that in July most banks bumped up there interest rates for investors by around 30 basis points. This means a 0.30% rise in investor interest rates, while a lot of owner-occupier rates have dropped.

For an average investor loan of some $400,000 this change means that investors may be charged around $100 extra each month, which could add up to thousands of dollars over the entire loan term.  

But the big problem is that not every loan that the bank classes as an ‘investment loan’ actually meets the investment loan criteria.

Even if your loan is for a non-investment purpose you may be facing investment rates on your loan. That’s why so many borrowers are speaking to their lender to reclassify their loan.

What classifies my loan as investment loan?

The bank will classify your loan as an investment loan if its original purpose was to fund an investment purchase.

Investments can take many forms, but to put it simply if you purchase a personal asset or assets that serve the sole purpose of generating income or gain, the money you borrow may be classed as an investment loan.   

Can the nature of my loan change?

Yes.

It could be that you purchased an investment home for the purpose of rental income, but mid-way through your loan term you decided to live in your investment property.

You may have borrowed money to buy a share portfolio, and then decided to sell your shares in order to travel overseas.

In either case your loan will no longer be an ‘investment loan’.

Should I reclassify my loan?

Prior to this year’s changes to investment lending, all property loans had similar interest rates so if the nature of your loan had changed it wasn’t a big problem. Now owner-occupier and investor loans can have significant pricing differences, so if the nature of your loan has changed you need to speak to your lender to make sure your loan is classified correctly.

Regardless of your loan type we recommend everyone with a home loan check their interest rates and make sure the right interest rate is being applied. If the bank misclassified your loan initially as an investment, you might only start feeling the consequences now.

To find out if your loan has been subjected to investor rates we suggest you look at your loan statements from June to current and scrutinize any significant changes to your interest rate, particularly those that are near to a 0.30% increase.

If you are unsure you can always speak to a broker about your interest rates to get expert advice.

How do I reclassify my loan?

In most cases it will be easy to contact your bank and find out why they've increased your interest rate. If your situation is complicated or you simply want help negotiating with the bank to make sure you aren’t paying too much interest, a broker will be able to negotiate on your behalf.

All About Loans can give you strong leverage with your bank to make sure they have your loan correctly classified and they are giving you the right interest rate.


Call 0732525208 for free advice!




Don Farquharson,
Loan Solution Expert
Owner & Principal Lender of All About Loans







[Photo credit: Lending Memo]

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