Secure the right loan for your investment
Beyond the challenge of finding a property that has tenant appeal and high yield potential, there are the practical details to secure the right loan or finance for your investment.
When approaching your lender or various lenders, it is important to remember that investor borrowers are the most sought after clients that financial institutions have.
Seasoned investors usually have high equity resulting from a history of borrowing, providing them with a competitive advantage.
Those with less experience are still considered desirable because they have the potential to return as high value repeat customers.
It is also necessary to determine specific property goals you are looking to achieve so that you know exactly what you want from your borrowed funds.
Researching the loan products of various lenders can eliminate unsuitable options and prepare you to effectively negotiate to secure the right loan with favourable terms.
Whether you are looking for a standard home loan or something more complex that helps you make use of repayments, tax and gearing, prudent inspection can go a long way.
Once you have established the right loan for your investment and personal situation, set up a schedule to review your terms on a regular basis.
Taxation rules, interest rates and available products are constantly changing – it is best to revisit the terms of your agreement in set time periods to ensure that you are on the best lending scheme as possible.
Even if switching loans seems like a hassle and more paperwork, it may save you thousands of dollars in the long run – calculate the savings and then let yourself be guided by the numbers.
As with most financial dealings, it is important to set up a budget and adhere to it as much as you can – try not to sign up for loan extras that you do not need.
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One of the most important factors for those looking to rapidly grow a portfolio is lender selection. It's all about choosing the right lender at the right time – this includes starting with the least generous lenders first and ending with the most generous when you're coming close to hitting a serviceability wall.
It's also important to have a sound understanding of bank policy – examples include having an understanding of which banks have an underwriting authority with LMI providers, which banks don't incorporate an assessment rate on other financial institutions debts and which don't have postcode restrictions.
If you're not in the profession then you're not expected to be up to speed with the above. I know when I started investing, I didn't have time to focus on the best finance deal – I focused on finding the best property and left all the finance stuff to my capable broker….oh yeah, and his services didn't cost me a cent.
Cheers
Jamie
Pass Go Home Loans Pty Ltd – Australia wide Mortgage Broker
http://www.passgo.com.au | [email protected] | p. 1300 656 299 | PO Box 286 Woden, Canberra ACT 2606
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Agree with Jamie's comments.
I get so many forum clients contact me and all they ask is what is the interest rate and can i get them a lower rate than they have.
Rate for an investor is fairly meaningless and whilst you certainly need to be competitive no lender is going to guarantee you the lowest rate for the term of the loan. Credit policy has to be the most important selection criteria and how this fits in with investors position and the stage he / she is at in growing their portfolio.
Too often i field calls / emails from clients who want to proceed with the next acqusition but are told they cannot afford it or their existing lender wont lend them anymore. Had the structure been correct they may have been able to buy this one and then next 2 withut change to their circumstances.
Working with a client for the long haul is part of our job and i love to see clients expand and grow.
Cheers
Yours in Finance
Agree with Jamie know the policies of the banks. Find out what the maximum exposure is before you sign up for anything. Read the fine print with low rates, you’ll find that after 12 months the rate goes up dramatically. Get yourself a pre approval before putting down that deposit, too many times clients come to me and say I’ve already put a deposit down. Do the legwork first as Jamie said be careful of postcode restrictions with lenders. Your broker should be asking the long term questions, we are in it for the long run not just a quick run on the board.