Document ID: chunk:federal_register_of_legislation:F2024L01073:front:0:p10
Version: federal_register_of_legislation:F2024L01073
Segment Type: other
Provision Reference: 
Character Range: 25109–28333

the borrower intends to occupy as a principal place of residence; and
                 2.          a part-time residence that is the principal place of residence of the borrower(s).
       Where finance is to be used for more than one purpose (e.g. owner-occupied, investment or non-housing purposes), the entire amount of the finance must be classified according to the predominant purpose (i.e. the purpose for which the largest share of the funds will be used). Where there is any doubt or ambiguity about whether a loan is for an owner-occupied or investment purpose, the loan must be treated as an 'other standard residential property' exposure.
 1.           'Principal-and-interest' refers to a loan on which interest is paid and principal is automatically amortised over the life of the loan.
 2.           'Other standard residential property' refers to any of the following exposures:
         1.             loans for a purpose other than owner-occupation, including for investment or business purposes;
         2.          interest-only loans with an interest-only term of five years or less, where only interest is paid and principal is not automatically amortised; or
         3.        other loans that do not meet both of the criteria in paragraphs 14(a) and 14(b) of this Attachment.

Lenders' mortgage insurance
 1.          An ADI may reduce its capital requirement through the application of LMI, where the insurance:
         1.           provides cover for all losses up to at least 40 per cent of the higher of the original loan amount and outstanding loan amount; and
         2.           is provided by an eligible lenders' mortgage insurer, which means that:
                 1.             for the purposes of Level 1 Regulatory Capital, the lenders' mortgage insurer must be regulated by APRA; and
                 2.          for the purposes of Level 2 Regulatory Capital, in the case of overseas subsidiaries of Australian ADIs, the lenders' mortgage insurer is regulated by an overseas prudential regulator.

Risk weights for standard residential property loans
 1.          An ADI must apply the risk weights in Table 1 to its residential property exposures that satisfy all of the conditions of a standard loan as set out in paragraphs 3 to 7 of this Attachment, based on their classification as an owner-occupied principal-and-interest or other standard residential property exposure, the application of eligible LMI and the exposure's LVR.

 1.              Risk weights for standard loans
LVR (%)                                Risk weight (%)

≤ 50                                   50.01 - 60       60.01 - 70  70.01 - 80  80.01 - 90  90.01 - 100  > 100
Owner-occupied principal-and-interest  LMI              20          25          30          35           40     55  70
No LMI                                 50               70          85
Other standard residential property    LMI              25          30          40          45           50     70  85
No LMI                                 65               85          105

 1.          An ADI may apply a risk weight of 35 per cent to residential property exposures that satisfy the conditions for inclusion within the