From 1 October 2016 the new investor loan to value (LVR) restrictions will take effect for registered banks. However banks have already been applying the restrictions unless you had pre-approval prior to the restrictions being announced.
40% deposit required
By now investors will be aware that the restriction requires a purchaser to have at least a 40% deposit for property being purchased for investment purposes. Loans for the construction of new dwellings or refinancing for the same loan amount are exempt.
Selling? - there’s a catch
What wasn’t immediately apparent was the effect on investors looking to sell some of their investment property. Banks on the sale of investment property will look to bring other investment property held in line with the new LVR rule. Which means if you currently have two investment properties with 20% equity in each property, on the sale of one of those properties the bank may look not just to have the loan on that property repaid, but also the loan on the other property repaid to a level which meets the 40% LVR rule.
So if you are an investor looking to sell one of your properties to release equity for other activities we suggest you discuss with your bank early, to avoid any surprises.
