{"id":5188,"date":"2015-07-27T01:00:26","date_gmt":"2015-07-26T15:00:26","guid":{"rendered":"http:\/\/realestatetalk.com.au\/?p=5188"},"modified":"2015-07-27T01:00:26","modified_gmt":"2015-07-26T15:00:26","slug":"the-best-ways-to-bleed-the-banks-dry","status":"publish","type":"post","link":"https:\/\/channels.realty.com.au\/realtytalk\/the-best-ways-to-bleed-the-banks-dry\/","title":{"rendered":"The best ways to bleed the banks dry – Michael Yardney"},"content":{"rendered":"

 
\nRecently there\u2019s been a lot of talk about banks changing the goal posts making it harder for property investors to get loans so in today’s show Michael Yardney<\/strong><\/a> details the 7 ways to bleed the banks dry.\u00a0<\/b>
\n <\/p>\n

Transcript:<\/h4>\n

Kevin<\/b>:\u00a0 There is a lot of talk about macro-prudential controls and ways that the banks are going to make it more difficult for property investors to get their loans. Is this all that new, and what are the ways that you can actually overcome this and protect yourself a little bit more?
\nMichael Yardney joins me. Michael, I know you\u2019ve been investing for decades. Is this all that new?
\nMichael<\/b>:\u00a0 \u201cInvesting for decades\u201d \u2013 that makes me sound old, Kevin. The rules are changing all the time with lenders, but that has always been the case. I remember the old days of credit squeezes where the Reserve Bank was able to restrict bank lending, so it\u2019s now new, Kevin. You just have to make yourself attractive to the banks.
\nKevin<\/b>:\u00a0 How do you go about doing that, Michael?
\nMichael<\/b>:\u00a0 It all has to do with serviceability. That\u2019s the term that they use to protect themselves from taking on what they see as risky loans. Fortunately, not all lenders use the same criteria to determine your serviceability \u2013 how well you can service the loan \u2013 and that can make a really big difference.
\nI know some lenders will lend up to $100,000 more than others to the same person just based on how they take into account their income, their credit cards, and their job. I think it\u2019s important to shop around to different lenders, but you have to do it in the right way. That\u2019s why I think having a good finance strategist on your side is a good way to start.
\nKevin<\/b>:\u00a0 So it has nothing to do with how you dress and how you talk, Michael?
\nMichael<\/b>:\u00a0 It used to be in the old days. I remember I used to have to put a suit on, go make an appointment, sit with the bank manager, and impress them. You also used to have to have a savings record. Remember those little savings books that you had before? The rules have changed now, so you just have to play with the current rules, Kevin.
\nKevin<\/b>:\u00a0 What are some of the things we should be aware of to make our profile better with the bank?
\nMichael<\/b>:\u00a0 They check your credit record before they make any decisions. One of the things they look at is what your income is and what your expenses are, but they also have a look at how many credit cards you have, have you defaulted on your credit cards, because they actually see the potential for you to max out your cards even if you\u2019re well disciplined.
\nMy suggestion would be look at your credit cards, and maybe get rid of one or two \u2013 if you don\u2019t need them \u2013 prior to applying for a loan. If your balance is zero, they still see that you could potentially use up those balances.
\nKevin<\/b>:\u00a0 Yes, you have access to those funds. I guess in doing that sort of homework too, making sure that your records look good when you take them in, like you know what you\u2019re doing.
\nMichael<\/b>:\u00a0 You should because banks require you to give proof of your income. If you\u2019re self-employed, they request that in different ways. Often, it\u2019s more than just a couple of pay slips. Having all that paperwork under control makes you a better investor any way, but it also makes you look as a better investor to the banks.
\nKevin<\/b>:\u00a0 When you\u2019re putting all that together, Michael, is it as simple as money coming in is simply income?
\nMichael<\/b>:\u00a0 You would think that, wouldn\u2019t you, Kevin? But some banks take into account 100% of your rental income. Some only take 80%, and some less. Some see dividends, second jobs, child maintenance, company bonuses, commissions, government benefits, and annuities all differently.
\nThat is, again, the reason why you have to have somebody who understands the rules of the game to take you through the maze. That\u2019s where an experienced finance broker can really be immensely helpful.
\nKevin<\/b>:\u00a0 Michael, you mentioned earlier about credit cards. I guess included in that would be lines of credit. Is it important to have an understanding of those and try to get rid of them if possible or reduce them?
\nMichael<\/b>:\u00a0 I think that\u2019s a good idea. One of the ways you can sometimes do that is even roll them up into your home mortgage and pay them at a lower interest rate. You may have a couple of store cards that you\u2019re now paying 18% or 19% on, and that way, you actually can maybe only end up paying 4.5% or 5% with your mortgage.
\nThe real trap, though, is if you do roll up your debts into one lower interest rate one, you have to pay them off quickly, make sure that you get rid of them, not pay them for the next 30 years of the length of your mortgage.
\nKevin<\/b>:\u00a0 Indeed, mate. You mentioned there about working with brokers. That\u2019s all a part of looking around for those discounts, but it\u2019s also difficult to know how to compare them, Michael.
\nMichael<\/b>:\u00a0 It is, and I wouldn\u2019t just choose a bank based on the discounts they give you this month, the fees, or the interest rates. There is a lot more to it, and a good broker would also look at the flexibility of the loan. I think everyone needs one loan with all the services with an offset account and credit cards. But once you get into your second, third and fourth investment property, sometimes the loans don\u2019t require all those bells and whistles. You can go to a smaller secondary lender who is going to maybe have a better package for you.
\nKevin<\/b>:\u00a0 Some of the other issues, just to round it out, Michael?
\nMichael<\/b>:\u00a0 One of the things that you could consider is taking on loans for longer terms if you can\u2019t afford the serviceability. Kevin, do you know that there are some banks that still give 40-year terms?
\nKevin<\/b>:\u00a0 Goodness, they wouldn\u2019t do it for me.
\nMichael<\/b>:\u00a0 Maybe not for you and me because they\u2019re not figuring we\u2019re going to be around for a long time. The concept is, though, that if you take a $300,000 loan over 30 years or if you take it over 40 years, what is going to happen is your interest payments are less, your monthly payments are less, and it makes it more serviceable.
\nThe trouble is that you\u2019re paying it for longer, so over the term of the loan, you\u2019re going to be paying back much more. But it\u2019s a good way to get in, and then consider refinancing it down the track.
\nKevin<\/b>:\u00a0 It goes back to that first point that you made about serviceability, doesn\u2019t it?
\nMichael<\/b>:\u00a0 It all has to do with how the banks see serviceability. Maybe a final point is that while they are all very different, sometimes the banks are on your side, and sometimes the right thing to do is nothing.
\nIf you haven\u2019t got the serviceability, don\u2019t get yourself into trouble by taking on a commitment now considering that down the track somewhere interest rates are going to go up and you may have difficulty sticking to your commitment.
\nKevin<\/b>:\u00a0 Wonderful stuff. Thanks again for your time. Michael Yardney from Metropole Property Strategists. Michael, your blog if we want to catch up on more?
\nMichael<\/b>:\u00a0 PropertyUpdate.com.au.
\nKevin<\/b>:\u00a0 Always good talking to you, mate. Michael Yardney from Metropole Property Strategists. Don\u2019t forget they have offices all around Australia, and you can contact them through their website, as well, Metropole.com.au.
\nThanks for your time, mate.
\nMichael<\/b>:\u00a0 My pleasure, Kevin.<\/p>\n","protected":false},"excerpt":{"rendered":"

  Recently there\u2019s been a lot of talk about banks changing the goal posts making it harder for property investors to get loans so in today’s show Michael Yardney details the 7 ways to bleed the banks dry.\u00a0   Transcript: Kevin:\u00a0 There is a lot…<\/p>\n","protected":false},"author":176692471,"featured_media":5189,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[10,13,25],"tags":[101],"class_list":["post-5188","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-kevin-turner-sponsored-channels","category-latest-story","category-sponsored-channels","tag-podcast"],"yoast_head":"\nThe best ways to bleed the banks dry - Michael Yardney - Realty Talk<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/channels.realty.com.au\/realtytalk\/the-best-ways-to-bleed-the-banks-dry\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"The best ways to bleed the banks dry - 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