5.10 Loan Purpose
5.10.1 Investment Loans
An Investment Property Loan enables a borrower to purchase or construct residential real estate for investment purposes. An investment loan may also include borrowings secured by residential property for any investment purpose.
| Feature | Additional Underwriting Policies |
| Maximum LVR & Loan Amount | |
| Security | - Security must be located in a Category 1, 2 or 3 postcode area as per the Genworth Security Location Guide
- Investment loan proposals outside these postcode locations will be considered up to 90% LVR on individual merit.
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| Credit History | - No defects in previous credit history.
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| Employment / Income | - Refer to section 5.7.2 Forms of Acceptable Income for further details.
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| Genuine Savings/Equity | - Minimum 10% genuine savings/equity need to be evidenced where LVR exceeds 85%.
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*Loans above 90% are subject to:
- No defects in the borrowers credit history
- Evidence of stable employment history.
5.10.2 Debt Consolidation
Debt Consolidation enables a borrower to consolidate existing consumer loans with their home loan, all in one new loan. Examples of consumer loans are personal loans, car loans, credit cards etc. As a consequence of consolidation of all existing debts, the borrower has only one monthly repayment, which in many cases may improve their servicing and reduce their commitment level.
| Feature | Additional Underwriting Policies |
| Maximum LVR & Loan Amount | - 90% (regardless of the number of debts being consolidated).
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| Security | - Vacant land is unacceptable.
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| Credit History | - Satisfactory conduct of accounts to be consolidated is to be shown. Refer to Refinance section 5.10.8 Refinance for further details.
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| Other | - The Lender should control the release of funds to ensure consolidated debts are repaid and closed. Where funds are released directly to the borrower, Equity Release parameters are to be observed and Lenders are required to obtain a written undertaking from the borrower that debts will be repaid and accounts closed from loan proceeds
- Lenders must ensure that the borrower is not in a worse position following consolidation of debts.
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5.10.3 Equity Release/Cash Out
Any loan, or component of a loan where the loan funds are released directly to the borrower/s, regardless of the proposed purpose, are subject to the following additional policies:
| Feature | Additional Underwriting Policies |
| Maximum LVR & Loan Amount |
Standard LMI
- 85.01 - 90% – Cash out component is limited to 20% of the security value
- 0 - 85% – No limit applicable to cash out component.
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| Security | - The security for Equity Release loans must be of a residential nature and can include vacant land up to 2.2 hectares in size if located in a Category 1 or 2 postcode area.
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5.10.4 Bridging Loans
A bridging loan enables a borrower to purchase another home prior to completing the sale of an existing property. The Lender takes a mortgage over both the existing and the new property pending the sale of the existing home.
| Feature | Additional Underwriting Policies |
| Maximum LVR & Loan Amount | - 85% (or product limit if it is lower) based on total exposure including capitalised interest for the period of the Lender's approval
- Upon sale of the existing property, the residual LVR is not to be any greater than that approved for the bridging loan.
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| Employment/Income | - Serviceability must be evident on 110% of the proposed end debt (a separate serviceability calculation will need to be completed to check that end debt is serviceable).
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| Loan Term | - Up to a maximum of 12 months
- The existing home must be sold within a given timeframe, usually 6 to 12 months.
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| Repayment Type | - The Lender can allow for interest on one of the loans to be capitalised for up to 12 months pending the sale of the existing property.
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5.10.5 Off-the-plan Strata Purchases
For the purposes of this Underwriting Policy, this term refers to unit/town house developments only. When a property is purchased “off-the-plan” it may be up to 12 months (or more) before settlement can be effected upon completion of construction.
| Feature | Additional Underwriting Policies |
| Maximum LVR & Loan Amount | Contract Signed | Max LVR |
| More than 12 months ago | 90% of on-completion valuation |
| Less than 12 months ago | 95% of purchase price only |
| Security | -
Genworth will consider LMI proposals for “off-the-plan” home unit purchases in the following circumstances:
- The proposal clearly identifies an off the plan purchase
- The security type and location are acceptable.
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For LMI, on-completion valuations will be accepted if:
- The contract to purchase was entered into at least 12 months prior to the valuation
If no initial valuation (based on plans and specifications) is received, approval can only be on an “In Principal” basis, subject to receipt of a satisfactory valuation on completion - on-completion
- If a valuation is submitted with the initial proposal, it must be from a qualified valuer, based on plans and specifications of the subject security and comparable sales in other similar developments
- The Lender must obtain an updated valuation upon completion of construction, which must support the earlier value and purchase price and confirm that the property has been completed to the standard specified
- If the purchase was contracted more than 6 months prior to advance of loan funds and the current valuation provides acceptable comparable sales of similar properties outside the development, the current valuation amount will be accepted for calculation of the LMI premium.
- Genworth reserves the right not to proceed should the final valuation not be satisfactory, or if resulting lending margins exceed policy for this type of security.
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| Other | - Acceptance/approval will lapse after 180 days (6 months) if the loan has not been advanced and the LMI premium is not paid.
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5.10.6 Home Improvement Loans
Genworth may insure additional advances for home improvements in the form of a Top Up of an existing loan, or a new separate loan with the same or different terms and conditions. Genuine home improvements are additions or alterations made to the property that add value to the property.
| Feature | Additional Underwriting Policies |
| Maximum LVR & Loan Amount | - 95% of revised (on-completion) valuation. All improvements require confirmation in the form of a valuation from a registered valuer to note successful completion.
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| Loan Purpose | - Examples of acceptable home improvements include: replacement or major upgrade of kitchen or bathroom, addition of swimming pool, garage or carport, extensive landscaping, upgrade or inclusion of a concrete driveway and/or complete re-roofing of premises.
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| Lender Responsibility | - Where an increased security value (resulting from proposed improvements) is to be relied upon, it is the Lender’s responsibility to ensure that the funds are applied to the security and the additional improvements/work is satisfactorily completed.
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5.10.7 Construction Loans
A construction loan enables a borrower to build a single or duplex residential property on an existing block or vacant residential land, or to carry out structural improvements to an existing dwelling, either for owner occupation or investment purposes.
| Feature | Additional Undewriting Policies |
| Maximum LVR & Loan Amount | - Maximum loans and LVR limits for construction loans are as per relevant Product Parameters
- Genworth will not insure owner/builder construction loans where the loan amount is more than 50% of the expected on-completion valuation
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| Lender Responsibility | -
Construction loans can only be insured if for single or duplex residential properties to be erected by a licensed builder, or, in some cases, an owner builder. Please note the following conditions when assessing construction loans:
- If not an owner builder, the building contract should be with a licensed builder, covering all aspects of construction, and should include a fixed price provision with a maximum 12 month term for completion
- The vacant land, plus Council approved plans and specifications should be valued by a qualified valuer on an on-completion basis
- The Lender is required to sight evidence of a current homeowner’s warranty insurance policy in place between the builder and the borrower
- The Lender is to ensure the borrower’s proposed equity in the construction project is fully utilised prior to advancing any loan funds
- During construction, the security should be inspected by either the valuer, or a duly qualified engineer, at slab/footings stage to verify construction is in line with approved plans and that work has commenced on the correct block of land.
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The Lender must satisfy itself that:
- Requests for progress payments by the builder are commensurate with work completed; and
- Sufficient loan funds are retained throughout the construction period to enable completion
- Where the construction works are to be completed by an external builder, at least two progress inspections are made during the construction period, including:
- One at slab/footings stage and
- One at the completion of construction before the final progress payment; or
- Where the construction works are to be completed by an owner-builder, a progress valuation is undertaken before each progress payment.
- Prior to the final progress payment, the valuer must confirm that the property has been constructed in accordance with the approved plans and specifications
- Prior to the commencement of full loan repayments, interest accrued on loan advances is to be paid by borrowers on a monthly basis.
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5.10.8 Refinance
A Refinance is where a borrower pays out an existing mortgage loan with funds from a new loan, (through another Lender), using the same security property. A refinance may often form part of a Debt Consolidation loan, and may include additional funds in the form of an Equity Release.
| Feature | Additional Underwriting Policies |
| Maximum LVR & Loan Amount | Maximum LVR | When applied |
| 95% | Refinance of existing mortgage loan only with no additional funds for either equity release, consolidation of another debt or to purchase/construct another property |
| 90% | Refinance of existing mortgage loan with or without additional funds for equity release (subject to Equity Release and Debt Consolidation limits) |
| Credit History | Product | Satisfactory Conduct |
| Existing Mortgage Loan | 6 months conduct history required |
| Personal Loan | 6 months conduct history required |
| Credit Card | 3 months conduct history required |
- Lenders must sight original statements of the loan being refinanced and retain copies certified by the Lender or its agent on the loan file. Copies may be forwarded with the proposal or, alternatively, the Lender may include a certification that the appropriate evidence is held
- Refer to section 6 Documentation for verification details.
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| Other | - Lenders must ensure that the borrower is not in a worse position following refinance.
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5.10.9 Loan Purpose Exclusions
Genworth does not insure loans approved for the following purposes:
- Loans for Development Finance (Construction of more than 2 dwellings on one block of land, purchase of multiple blocks of vacant land in a sub-division, refinancing commercial facilities that have been used to fund development finance or developers gearing up against residual stock to fund next development)
- Vendor Finance (WRAP Finance).