Property investors use credit differently than non-investors. Often property investors want to maximize their borrowing power to maximize their exposure to capital gains in the property market. This can mean that the lender needs to be selected carefully and not just on price (interest rate and fee costs) or loan features. Certain lenders allow greater amount of rental income or other income types for serviceability, others have lower assessment interest rates. Certain lenders also have delegated underwriting authority for loan to value ratios above 80%, this can make them more flexible in assessing your loan application than if it also needs to be approved by the lenders mortgage insurer.
Make sure that you match the correct lender and loan for your investment strategy.
Loans for property investors often require different structured set-up than a typical owner occupier home loan.
If your bank or another broker set up your loan structure incorrectly, you are likely to spend a lot of extra money whenever you want to borrow more, or sell a property or spend a lot of time and effort trying to untangle your loan portfolio.
Ask professional investment property loan brokers to set up your loan property from the start or untangle your loans that have been set up incorrectly.
This can change the actual cost to you if you structure your investment property loans correctly. Typically interest on an owner occupied home loan is not tax deductible. On the other hand, interest on an investment property or income-earning property is tax deductible. Therefore if you structure your loans to pay down non-deductible debt ahead of deductible debt, this can be an advantage financially.
Note: This is not to be considered as tax or financial advice. Speak to your qualified professional for advice to meet your specific circumstances.
If you have an aggressive investment strategy there are two aspects that may limit your next purchase:
Your deposit can come from cash (from savings or sale of assets) or borrowing against equity in an existing property that you still own. Property investors often want to maximize their valuations to release equity from property they already own. Different lenders use different valuation processes and companies, this can have a large impact on the valuation of your property and the amount of equity that you can release to fund further investment property purchases. Different lenders will also lend at higher loan to value ratios and/or capitalize lenders mortgage insurance. This can mean purchasing sooner instead of waiting for a larger deposit, which can also mean paying a high purchase price in a rising market.
Aggressive property investors typically also want to maximize their loan serviceability. Different lenders calculate borrowing power differently. Of particular importance are the lender’s consideration of rental income (as some lenders discount rental income and others do not) and the lender’s stress testing of interest rates of your existing investment property loans when calculating serviceability for your next investment property loan. These are some of the factors that need to be considered so that you can continue to grow your property portfolio.
Knowing which lenders to use and the order to use them in can make a big difference in your borrowing power. If you are planning more than one property purchase in the near future you may want to use a lender that allows you a greater borrowing power for future purchases when it is needed.
Contact your trusted mortgage brokers to find out what they can do for you.
Contact a mortgage broker about an investment loan
A mortgage broker will go through with your situations and objectives to ascertain the best way forward in your investment property loan.
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Already have one or more investment loans? Get a review of your existing investment property loan(s). The investment loan landscape is changing and the major lenders are increasing their interest rates. Don’t get caught up paying too much interest on your investment property loans!
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