Shop around when it comes to Property Investment Loans
Add Urban Money to your list when you are shopping around for a property investment loan, that is the message from Urban Money Lending Manager Geoff Wilson.
This is because the major banks, including the Commonwealth Bank of Australia (CBA), have recently increased investment property loan rates leaving customers paying more.
The increase in property investment loan rates is due to the banks facing increasing pressure to build greater balance-sheet strength and the need to reduce the loan to value ratios on investment lending in line with Australian Prudential Regulation Authority (APRA) restrictions.
The APRA restrictions have impacted on property investment lending by the major banks in three ways.
- Changing of serviceability requirements on investor loans; making it more difficult for investors to gain finance.
- Borrowing capacity has been downsized, meaning banks will not lend as much as previously
- Interest rates have increased and the repayments on existing debt have increased.
In a further step, according to a recent ABC report, CBA subsidiary, Bankwest stopped including the tax benefits of negative gearing in its assessments of borrowers’ capacity to pay which affects how much applicants can borrow.
Does this impact on Urban Money customers?
This has a positive impact for Urban Money customers as they can still access competitive rates on their investment loan needs, so long as they meet our usual lending criteria and approval process.
Urban Money Lending Manager Geoff Wilson says this latest move by the major banks has created opportunity for other lenders to capitalise on the change in the market.
“At Urban Money our lending policy has remained the same when it comes to property investment loans, we have not lifted our rates like the major banks and we still include negative gearing provisions. This makes it less expensive to do business with us,” Geoff said.
“If you are shopping around for an investment loan, now is the time to add non bank lenders like Urban Money to your shopping list,” Geoff adds.
A comparison between the Urban Money and CBA’s property investment loan shows a clear difference in the rate charged.
For a standard property investment loan at Urban Money the rate is 4.37% p.a. comparison rate 4.52% p.a. compared to CBA’s rate of 5.56% p.a. comparison 5.70% p.a. but with a 0.7% p.a. discount for loans over $250,000. For comparison rate calculation information see the notes below.
What is the cost of this difference over the life of your loan?
In the example below we take a look at the cost comparison of the CBA and Urban Money investment loan over the life of the loan. This gives us a clearer picture of the monthly and overall cost of the loan.
For an investment loan of $300,000 over a 25 year period the monthly repayment with Urban Money would be $1092 per month compared to CBA’s $1215 per month. That is a monthly saving of $123 on an interest only basis.
For a bigger picture look, that takes into consideration the principal and interest the figures below reflect the total costs of an investment loan over the 25 year period, using the CBA home loan calculator.
Total loan repayments$493,632
Total interest charged$193,632
CBA (with a 0.7% p.a. discount)
Total loan repayments$518,817
Total interest charged$218,817
CBA (without a discount)
Total loan repayments$555,909
Total interest charged$255,909
That means the Urban Money property investment loan can save you $25,185 over the life of the loan when compared to the CBA investment loan.
To talk speak with an Urban Money Lending Manager simply contact us.
What you need to know about the calculations used in this article.
Calculations are estimates provided as a guide only. They assume interest rates do not change throughout the loan and are calculated on the rate that applies for the initial period of the loan (e.g. for fixed rate options, the repayments are for the initial fixed rate period only). Interest rates referenced are current rates. However, our interest rates are subject to change at any time.
Fees and charges are payable.
The calculations do not take into account fees, charges or other amounts that may be charged to your loan (such as establishment or monthly service fees or stamp duty). If you are borrowing more than 80% of the value of the property, Lenders Mortgage Insurance or Low Deposit Premium may apply. Any of these additional amounts will increase repayments under the loan.
Calculations are not a loan approval. Applications are subject to credit approval, satisfactory security and minimum deposit requirements. Conditions apply to all loan options. Full terms and conditions will be set out in our loan offer, if an offer is made.
Comparison rate calculated on a secured loan of $150,000 over a 25 year term.
This comparison rates above is true only for the examples given and may not include all fees and charges. Different terms, fees or other loan amounts might result in a different comparison rate.