How to get your first investment loan
There’s no doubt about it – investing in property is one of the best ways to increase your wealth and set yourself up for the future. With the right property and financing, your assets will appreciate in value while returning a profitable yield from rental income. And since property value is not reliant on the unpredictable ups and downs of the stock market, it provides you with some much-needed stability and helps you to diversify your investment portfolio.
But buying your first investment property can be overwhelming. There are plenty of pitfalls that can trip up the inexperienced investor.
See also: Advantages and disadvantages of investing
The good news is you don’t have to do it alone.
Hunter Galloway has helped dozens of first time property investors just like you. Our experienced team of brokers know investment finance inside and out. We do the hard work of comparing loans and finance structures across multiple loan types and over 20 different lenders. This means that you don’t have to lose sleep over wondering whether you got the best rate, or if you’ve overextended yourself and put your hard-earns savings at risk through an uninformed financing decision.
It’s important to start your property investment on the right foot. By organising your property portfolio with the right loan, you will be able maximise your borrowing capacity and made every one of your hard-earned dollars work hard for you.
When we help our clients to invest, we cover all of the bases. By looking at negative gearing, capital gains tax, depreciation, offset accounts and other factors, we will make sure that you choose the right loan for your circumstances.
FAQs for Property Investors
Will I qualify for a loan?
The approval criteria for investment loans can get quite complicated, especially if you need to take into account negative gearing benefits or other factors to prove that you can afford the loan. Banks consider investment loans to be a higher risk than standard home loan, so you will need to be in a strong financial position to qualify.
Here are the basic lending criteria:
- 5-10% of the property value in genuine savings
- A good credit history, with an above average credit score
- Stable employment
Which lenders can help?
There are a range of bank and non-bank lenders that can help you with financing your investment. Each of these lenders have different qualifying criteria, so without knowing your individual circumstances it is hard to make a recommendation. The best way to ensure that you’re getting the best deal for your investment is to engage the services of a qualified independent broker.
How do I increase my borrowing capacity?
There are several different strategies you can use to maximise your borrowing capacity and finance your investments. Here are a few simple tips:
- Apply with a lender that has favourable lending criteria for investors
- Apply for loans jointly with a spouse so that your total household income can be taken into account
- Buy positively geared investment properties
- Reduce your credit card limits
Do all lenders use the same criteria?
Banks and other lenders will assess your investment loan based on different criteria. You will often find that your borrowing capacity varies (sometimes quite substantially) depending on the lender that you choose. Here are some ways that lending criteria can differ:
- Rental income – most banks will only take into account 80% of your rental income, whereas others will consider up to 100%
- Other income – lenders will differ in the way that they treat other income like overtime, bonuses, commission, allowances, dividends, trust distributions and self employed income
- Assessment rate – Most banks will add up to 2% of the current rate when assessing your borrowing capacity. Some lenders will waive this if you are fixing your rate for more than 3 years.
- Negative gearing – not every lender takes negative gearing benefits into account
With so many different criteria across lenders, it is hard to know which lender to go to for your loan. Luckily, Hunter Galloway has the knowledge and experience to find the right lender and get your loan approved. If you’d like to maximise your borrowing capacity then call us or book a free assessment.