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Bank bans homes as commercial loan security

Bank bans homes as commercial loan security

In a sign of growing anxiety about Australian house prices, a prominent bank has said it will no longer accept residential property as loan security on a “stand alone basis”.

ING made the announcement in a note to mortgage brokers and lending managers this week, with the change to be effective on applications received from this Friday, 19 January 2018.

“A residential security property is no longer acceptable security on a stand alone basis. It’s important to note that we will continue to accept a property which is used for mixed purposes (commercial/residential). However, the maximum LVR has been reduced to 75 per cent (from 80 per cent),” the bank said.

“Equity release against residential collateral is [to be] limited to 20 per cent of the property value. Where the funds are to be used towards the purchase of a commercial property with ING, the equity release cannot exceed 20 per cent of the value of the purchased commercial property.”

ING said that panel beater and mechanical workshops will no longer be accepted as security for a commercial loan, while a number of other property types will be assessed on a case-by-case basis. These are:

  • Boarding houses in inner Sydney/Melbourne/Brisbane, with a maximum LVR of 60 per cent. Boarding houses outside of these areas are no longer acceptable.
  • Serviced apartments or offices.
  • Child care centres (with a lease in place to a national operator) with minimum of three years of profitable operation. Only those within major metropolitan areas will be considered to a maximum LVR of 65 per cent on a freehold basis.
  • Service stations leased to major/national operators who are responsible for environmental damage.
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    “A residential security property is no longer acceptable security on a stand alone basis. It’s important to note that we will continue to accept a property which is used for mixed purposes (commercial/residential). However, the maximum LVR has been reduced to 75 per cent (from 80 per cent),” the bank said.

    “Equity release against residential collateral is [to be] limited to 20 per cent of the property value. Where the funds are to be used towards the purchase of a commercial property with ING, the equity release cannot exceed 20 per cent of the value of the purchased commercial property.”

    ING said that panel beater and mechanical workshops will no longer be accepted as security for a commercial loan, while a number of other property types will be assessed on a case-by-case basis. These are:

    • Boarding houses in inner Sydney/Melbourne/Brisbane, with a maximum LVR of 60 per cent. Boarding houses outside of these areas are no longer acceptable.
    • Serviced apartments or offices.
    • Child care centres (with a lease in place to a national operator) with minimum of three years of profitable operation. Only those within major metropolitan areas will be considered to a maximum LVR of 65 per cent on a freehold basis.
    • Service stations leased to major/national operators who are responsible for environmental damage.
    • Commercial properties less than 50sqm in size.
    • Residential unit blocks in suburban/metropolitan locations (maximum 12 units per block with minimum unit size of 50sqm). A minimum of two years investment income servicing capacity must be evidenced.
    • Other property requiring specialist management.
    Bank bans homes as commercial loan security
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