Promoted by Mortgage House.
The benefits of a bigger down payment can’t be denied: smaller monthly payments, more lenders willing to partner with you, mortgages at a lower interest rate and paying less total interest over time. But if you haven’t saved the usual 20% of your desired investment property’s purchase price, there are still ways you can successfully apply for an investor loan.
Be the perfect applicant.
When applying for an investment loan, your lender won’t solely look at your savings. Knowing what the perfect applicant looks like on paper can help increase your chances of getting approved.
One of the characteristics your lender will look at is your employment history. Having stable employment for the past 6 to 12 months with a strong income is a big plus. Lenders will often also want to see that you have a good asset position, considering your age and income. A clear credit history is key, too; for example, through proof that you have paid all of your bills (such as rent, credit cards, personal loans and other debts) on time for the last six months.
If you have multiple credits cards and personal loans, you may struggle to get your loan approved. As a loose guide, applicants who have over 7% of the purchase price in unsecured debts are often not approved. So, making sure you have minimal debts before lodging your application will also help with getting your loan approved.
Apply for Lenders Mortgage Insurance (LMI).
Lenders Mortgage Insurance (LMI) can help you enter the property market sooner by allowing you to borrow up to 95% of the purchase price. LMI protects the lender in case the borrower is unable to make the repayments. This gives the lender the reassurance that they are covered in the case of unfortunate events.
With a payable deposit as low as 5% of the purchase price, this is the most popular way to kickstart investment loans. It may come with a fee that’s calculated from a combination of the size of your loan and the type of loan. This fee is often paid upfront at the loan settlement and covers your lender for the entire time of the loan. You can also request to add the cost of your LMI onto the total loan amount to further reduce your upfront costs.
Use your equity as a deposit.
Considering you’re after an investment property, you might already own property. If this is the case, you can simply use your equity towards your deposit so that the initial deposit requirements won’t apply. Plus, you can look at refinancing the loan once you’ve built up some equity in the investment property.
Bring a guarantor on board.
Another way to enter the low-deposit loan market could be through a Guarantor Investment Loan. This could be an option if you have an immediate family member who has a good amount of existing equity in their property and is happy to act as a guarantor for your investment loan.
Like the previous option, you can look at refinancing your loan further down the line.
Find out which option suits you best.
In many cases it’s advantageous to enter the property market quickly: property prices can rise, opportunities can vanish and interest rates can go up. But there are further considerations, such as the time-value of money and tax issues associated with determining your ideal deposit.
Need some help with determining your best option? Chat with a Mortgage House Home Loan Specialist. They can provide helpful tips on your investment deposit, loan options and show you how to get the best deal. Visit https://www.mortgagehouse.com.au or call 133 144.
The perfect home loan for you entirely depends on your situation, so to make the most of this situation it’s a good idea to speak to a credible lender about the pros and cons before making up your mind.
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