Non-bank mortgage lender Resimac has launched an interest-only mortgage with a 20 year term that will only be available to residential property investors.
The 20 year interest-only option of the new cashflow 20 investor loan is available for up to 50% of a property's valuation, 50% loan-to-value ratio (LVR), although in total investors can borrow up to 60% LVR on existing properties and 70% on new builds.
However the proportion of a loan above 50% LVR would not be interest-only and would require interest and principal repayments.
Borrowers could choose between variable and fixed rate terms for the new loans, with Resimac currently charging a variable rate of 6.59% and a two year fixed rate of 6.94%.
A 1.5% establishment fee would also apply to the new loan, which could be capitalised.
Resimac NZ General Manager Luke Jackson said the new interest-only only loan was not available for development projects.
It's mainly aimed at existing investors chasing buying opportunities in the current market and looking to grow their portfolios, he said.
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33 Comments
Will add Resimac to my list of pending failed lenders.
Couldn’t possibly end badly…
Depends if they have first ranking mortgage… @ 50% that’s a fairly good coverage
So what are they saying by lending only an LVR of 50%? That they need protection against a price fall, halving today's purchase price? Could be....
If you read the fine print, even though you are making all payments on time, they can call in the loan for immediate repayment if the value of the property drops below what they deem to be acceptable to them. So it doesn't even have to fall 50% for you to potentially find yourself in a pickle.
Seems a sensible pitch for their target market. Given the proliferation of multi-story, multi-dwelling, row townhouse developments underway, I think the developers need the buy-to-let market to remain viable. Good quality rental stock is always welcome.
Indeed, Kate. The quality of the rental stock across NZ is pitiful…..
The house I rent doesn’t even have electricity. It’s freezing 🥶 in winter and, worse still, I have to watch TV by candlelight. 🕯
TTP
Do you lick road wit' tongue as well?
Pfft, luxury!!
Hard times make strong men.
Ahh love those old analogue TVs!
Serious question, are you ok TTP...?
This sounds more like an owner occupier situation where the govt has not mandated all those fans and heatpumps and stuff.
Off grid TTP?
I was interested in two houses to rent. One turned out to be not in my budget... even though in east tamaki the rent is $1000 pw. The other was in the appropriately named Grotto St, so I kept walking
It would be a struggle to make the numbers stack up Kate. Unless rents were to rise significantly, but then someone could come along and petition the government for rent controls...
Guilty as charged :-).
Personally, I think it's time for a public debate on rent controls......
It's something the Labour Govt could do to win favour in its desperate dying days.
TTP
The Govt probably won't do it then.. Jacinda only sees adoring fans wherever she goes like UN lovefests, milehigh meetings with Justin and primary school visits. All are opportune photoshoot moments. She probably believes she can be a 3 termer
Already underway by the NZ Human Rights Commission.
https://www.hrc.co.nz/our-work/right-decent-home/measuring-succcess/
Some interesting facts to consider before consering unknown consequences. Read on Stuff.co.nz
Here’s what we can learn from Ireland’s rental market collapse
Miriam Bell05:00, Aug 28 2022
Just what Jacinda and her merry men don't want. Another way for investors to compete with their potential voters... I mean First Home Buyers.
The propensity to vote Labour is diminished as the equity in a voters home rises. That is why Labour have never been serious about FHB assistance since the 80's.
Investors will stay well clear of this. Maybe one or two on here who will jump right in.
A 1.5% establishment fee is pretty steep
You would have to be bold to take this up. I imagine it might attract an investor who can't afford the repayments that include capital to a regular bank so transitions to this. The cost would be high. Every million would have a one off cost of 15k and the interest rate would be quite high on top of that.
I'd guess that's the real target market.
There's no doubt people out there that are getting desperate for interest only but the main banks have declined them even though they have a strong equity position. I can see people taking this up until they can get back in with a main bank...
Now the investors are taken care of, what about a 20 year fixed rate mortgage for FHB?
The investors taken care of? It isn't a 20 year fixed rate offer. It's an interest only for 20 years offer. It looks like a dog of an offer, one which will only be taken up by desperate investors. The article states the interest rate options, those being floating at 6.59% or a 2 year fixed at 6.94%. First home buyers with 20% deposit will have an interest rate advantage of around 1.5% over an investor on this loan if bidding for the same property. Looks to me like Resimac knows there is a market for this loan and going by the equity requirements, they expect to be forcing sales on a high proportion of those desperate enough to need these loans.
Did I say anything about fixed rate offers? Investors typically have a 5 year limit on IO lending with the banks, this offer is attractive in the sense that they can go interest only for up to 20 years.
What I'm suggesting is that a bespoke lender comes out and offers 20 year fixed term mortgages, specifically targeted at FHB.
Also, they might have a 1.5% interest rate advantage, but how many FHB are buying with interest only? On a cashflow basis, an investor @ IO will have the upper hand.
The party must go on
It's 3.00 am and you are munted drunk if you consider taking this offer home.
This product has been around for a few years now….
I was looking at one today for a client who has 350k/year rental income and debt servicing costs of 120k/year. The banks won’t lend further as the customer can’t meet the CCCFA affordability tests, so Resimac will write it as a non-CCCFA loan. The cashflow still needs to stack up.
It's a marketing tactic, advertise to many, select just the few profitable deals. If Resimac published their approval rate, no one would waste their time applying. 'Although you don't qualify for this particualr rate, we can take you out in the alley and sell your soul to the mob if you like'.
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