ING has made significant changes to its underwriting guidelines for commercial loans, with the changes to come into effect at the end of this week.
In a broker note, ING announced that it was making changes to its underwriting guidelines, which will be effective for applications received from Friday (19 January 2018).
The revisions include changes to accepted forms of security and the process in which loans greater than $3 million are handled.
Notably, ING announced that a residential property will no longer be accepted as security on “a standalone basis” for commercial loans.
“Mixed purpose” properties, however, used for both residential and commercial purposes, will continue to be accepted as security, although ING has reduced the loan-to-value ratio (LVR) from 80 per cent to 75 per cent on credit obtained with a mixed-purpose property as security.
Further, ING has limited equity release against residential collateral to 20 per cent of the property value. If borrowers use such funds to purchase a commercial property, equity release cannot exceed 20 per cent of the commercial property’s value.
ING has also stated that it will no longer accept “panel beater and mechanical workshops” or “boarding houses” outside of inner Sydney, Melbourne or Brisbane as security.
However, ING will accept, on a “case-by-case basis”, the following as security:
- Serviced apartments or offices
- Child care facilities within a metropolitan area, with a lease in place from a national operator, and a minimum of three years of profitability. An LVR of 65 per cent will be placed on freeholds in major metropolitan areas
- Service stations leased by major or national operators who are responsible for environmental damage
- Commercial properties less than 50 square metres in size
- Suburban or metropolitan unit blocks with a maximum of 12 units per block and minimum unit size of 50 square metres. At least two years of investment income servicing capacity must also be evidenced
- Other properties that require “specialist management”
The non-major bank has also announced that it will be introducing “relationship management” for loans that exceed $3 million, with the exception of residential home loans.
Commercial and mixed-purpose applications that exceed $3 million will be allocated a dedicated commercial account manager to manage the application “from submission to settlement”.
Transactions of less than $3 million will be “processed as normal”.