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2 major lending constraints today and how to overcome them

lending, payment, property investment, finance

2 major lending constraints today and how to overcome them

By Bianca Dabu | 28 September 2018

Several changes in the property investment landscape have significantly altered the lending environment, making it harder for some investors to grow their portfolio. However, mortgage experts believe that one old-school technique could be the most effective way to combat lending constraints.

The royal commission and the lending interventions implemented by the Australian Prudential Regulation Authority (APRA) have undeniably impacted the way investors access financing for their portfolio.

According to mortgage broker John Manciamelli, investment lending has generally become harder nowadays. In fact, looking back at his clients last year, 25 per cent of them would not have qualified for a home loan this year.

Aside from regulatory changes, the property market fluctuations are also affecting investors’ serviceability, particularly those who have put their money in the now-softening markets of Sydney and Melbourne.

Even established investors who are looking to refinance their existing properties are having a hard time navigating through the new lending environment.


“There's a bit of hurt happening out there and it's stifling people's property aspirations,” the mortgage expert highlighted.

Genuine serviceability

One of the biggest lending constraints for property investors nowadays is the rise of more conservative lending practices.

All of a sudden, a lot of banks and independent lenders are more adept to entertain home buyers as clients.

Mr Manciamelli said: “There are some lenders who have an appetite for investment lending. Your bank may not be that particular type of lender at the moment. It's really important that you start to deal with lenders who have an appetite for investment lending.”

As a direct effect of conservative lending practices, more lenders are now requiring harder evidence of financial responsibility such as bank statements that detail your lifestyle choices—from your daily cup of iced coffee to your monthly Netflix subscription and gym membership.

Gone were the days when you can demonstrate your expenses simply by writing it down on a form. It’s all about genuine serviceability now.

“Right now, if you've got a gym membership, if you've got Netflix, if you've got daycare, and all of that's showing up on your bank statements, that's going to be added to your living expenses," according to Mr Manciamelli.

Due to these constraints, a lot of investors have no other option but sit on their hands for a while until they are deemed financially ready to grow their portfolio.

Old-fashioned budgeting

To achieve genuine serviceability, Mr Manciamelli strongly advised investors to have genuine savings.

When his clients couldn’t get their mortgage application approved, he usually suggested to simply gett rid of unnecessary expenses. In three months’ time, they could be ready to present a new and better application.

“What we're saying is, ‘Look. Do you really need Netflix, that recurring monthly expense? Just tighten up a bit,” the mortgage expert said.

At the end of the day, investors need to sort out their financial priorities in order to achieve their goals without unnecessary delays.

According to Mr Manciamelli: “If you want to get into the property investment game, then you might need to pay attention to the serviceability side of things. Have a look at what it is that's more important to you.”

“It's just old-fashioned budgeting. People have to save. It's just going back to old-fashioned values and making sure you can service your loan by having a bit of discipline in terms of how you spend your money and where you spend your money,” he concluded.


Tune in to John Manciamelli’s episode on the Smart Property Investment Show to find out how investors can continue their wealth-creation journey in the current lending environment.

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2 major lending constraints today and how to overcome them
lending, payment, property investment, finance
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