Debt to Income Ratio - are you in the 60%? Poll

[PTILoveYou]

The policy is just there to treat the symptom, not the cause.

Rents will rise. More restrictions on lending, more rent rises.

[donna]

rents = income

[foss]

It won't just affect new acquisitions. Wait until you try to refinance. It will be a NO.

I suggest you email Bill English or your local MP and protest. If no noise it will become reality. May be only months away.

[donna]

A double whammy for Investors with higher LVR restrictions rumoured. It's 30% in AKL - my guess is this will increase to 40 or 50% and the regions will move up to 30%. A change in LVR requirements is said to come first then the debt to income ratio. Hard to believe this is going to end well.

The Banks want to continue to lend so they earn $$ - if there's a max ratio on DSR that's going to affect FHB (unless they're exempt).

So Investors not able to refinance dump properties onto the market - kicking out tenants many of whom will still not qualify to be home buyers. This would be nasty at best - less rentals - more competition, higher rents = poorer standard of living etc.

cheers,

donna

[brendan]

It won't just affect new acquisitions. Wait until you try to refinance. It will be a NO.

When you say "refinance", do you mean switch banks, or re-fix the loans with the existing banks.

[Wayne]

So Investors not able to refinance dump properties onto the market - kicking out tenants many of whom will still not qualify to be home buyers. This would be nasty at best - less rentals - more competition, higher rents = poorer standard of living etc.

And someone who buys said houses won't then need to rent so freeing up a rental property for those who don't qualify as home buyers.
So rents stay the same.

[donna]

That would be the ideal however a likely scenario is cashed up 'big fish' investors may swoop in and grab the bargains paying a bit more for them than the FHBs.

Isn't this just another step in the erosion of the middle class? The small time investors get squeezed out - the big players just get bigger.

[Wayne]

That would be the ideal however a likely scenario is cashed up 'big fish' investors may swoop in and grab the bargains paying a bit more for them than the FHBs.

Isn't this just another step in the erosion of the middle class? The small time investors get squeezed out - the big players just get bigger.

Then there will be more rentals again so rents won't go up - it is the rent increase bit I'm looking at not who owns them.

[donthatetheplayer]

I think the income multiple is too simplistic and will inevitably lead to problems.

As the banks are well aware the issue when assessing risk isn't debt to income it is serviceability! The debt to income talk is purely to try and stop people from buying multiple houses. As others have said there are alternatives and it just will not work. All it will do is expose many, many individuals to even greater risk through non-bank lenders and higher rates/costs of business.

[Halfway To Paradise]

If my LVR is over 60% (probably 70%) and I sell a rental for more than I owe the bank on the mortgage, can the bank or will they insist I pay the income off other mortgages until I am under 60% LVR

[Don't believe the Hype]

If the properties are with the same lender and they're cross collateralised then the bank is well within its rights to demand full nett proceeds of sale until your LVR is at a level they deem acceptable.

The risk here is that if you spend any funds improving the property prior to sale those funds may end up paying down debt. Ie. If you spend $30k on new kitchen/bathroom that adds $60k to your sale price and the bank takes full nett proceeds then you have made a good investment $2 return for every $1 invested but if you needed access to the original $30k in the near future you may have trouble accessing it.

my advice is to work with the bank before you put the property on the market, agree the amount of funds bank want paid back based on a given sale price and post sale LVR for the balance of the portfolio - get it in writing.

[Frezzinghot]

Just worked out our PPOR and we are at 3. Investment property is another story! But we are at over 7-8% yields so cashflow neutral but when you look at the income vs debt its not pretty.

FH