I have been told a few times that it is best to go through a broker for finance rather than direct to a bank as the broker will know what features I will need on an investment loan. I have seen at least 3 smaller lenders that are not represtented by any broker, that offer considerably lower interest rates (ME Bank, UniCredit, CUA). If I was to go to them direct myself, what features do I want in an investment loan? I am about to purchase my first IP, hopefully the first of many!
Hi there
Welcome aboard.
I’m a broker so the post will sound biased – so take from it what you will.
If it’s the cheapest rate and a small saving each month that you’re after than go to an online lender, select the cheapest and apply. If you’re serious about investing and growing a portfolio than seek advice from an expert, get it right from the start and the small savings you’ll achieve now should be minuscule in terms of what you’ll achieve in the longer term.
Cheers
Jamie
Jamie Moore | Pass Go Home Loans Pty Ltd
http://www.passgo.com.au
Email Me | Phone MeMortgage Broker assisting clients Australia wide Email: [email protected]
So what your saying is that you are paying for the advice and guidance (as opposed to thinking about lining the big 4's pockets!)
No – I'm saying that the cheapest rate often comes at a cost later on because these lender aren't often conducive to the needs of investors.
Cheers
Jamie
Jamie Moore | Pass Go Home Loans Pty Ltd
http://www.passgo.com.au
Email Me | Phone MeMortgage Broker assisting clients Australia wide Email: [email protected]
Certainly two of the lenders you have mentioned are available to Brokers but whether a Broker would ever have them on their panel is a different matter.
As Jamie has mention some lenders welcome investor loans and others don’t.
That is not to say they don’t offer them just that they are not competitive overall in terms of Credit Policy.If you are merely chasing the cheapest rate of interest get the loans manager of any of the 3 lenders mentioned to put in writing that their rate will always be the cheapest and that they will never run short if funds or put the rate up (or not reduce it as much as others because of funding costs ) and query him of her when they say NO.
Having been around for 25 years + in this industry I have seen many a lender come and go and whilst you can argue well there are no early repayment fees on a variable rate loan there are still costs of moving from 1 lender to another especially at s 95% lvr.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
renel wrote:I have been told a few times that it is best to go through a broker for finance rather than direct to a bank as the broker will know what features I will need on an investment loan. I have seen at least 3 smaller lenders that are not represtented by any broker, that offer considerably lower interest rates (ME Bank, UniCredit, CUA). If I was to go to them direct myself, what features do I want in an investment loan? I am about to purchase my first IP, hopefully the first of many!There can be a difference in serviceability between lenders particularly for investors when some lenders take into consideration negative gearing. I would not consider any of the lenders you mentioned as having better rates then some of the other banks. Particularly if your loan size is on the upper end cause they are very negotiable.
jonRenel,
What I think the people are trying to tell you is yes there are some great rates out there with the lenders you mentioned. But what you will find is that lenders that offer the cheaper rates will accept a lot less risk when dealing with investors. So often their serviceability calculation can be a lot less favorable so when you start looking to purchase that second and third investment property you can start to have difficulty. This is where a broker will sit down with you and do an analysis of your situation to ensure you are getting the best loan for now and in the future.
It doesn't have to be a case of going with the big 4 and if you don't want to their are many lenders out there with excellent rates that will match what you are finding with the lenders that you have mention. but you just need to make sure they meet your needs.
Dustin McMahon
0430 110 304
Your Broker | [email protected]Not a broker so take what I say with a grain of salt.
An early in the morning post but things I look for are:
1. Serviceability – this is the biggest for me.
The other factors considered, and in no particular order, are:.
2. Loan to value ratio on offer for the property being looked at.
3. Length of interest only period.
4. What is involved extending interest only period – some banks do a full review others just press a button.
5. Interest rates.
6. Lending to suit the postcode I am buying in.
7. Line of credit policy.A good broker should know this stuff like the back of their hands – they eat it, drink it and breathe it every day.
Renel,
Specifically to your question, in most cases all an investment loan needs to have is 30 year term, 5 year interest only, either variable or fixed rate (or mix) and internet access. No bells and whistles, no associated credit cards, etc.For some investors, they may need an offset if they do not have a PPOR.
As Richard said, 2 of the lenders mentioned are available to brokers, you would need to see if they are on the broker lender panel (often an issue for the aggregator credit rep model). CU's tend to target the OO market and often require you set up direct salary debit which may not suit an investor and they tend not to be as competitive in the fixed interest rate area as they do not have the pricing power/credit rating to access cheaper funds. The interest rate will also depend on LVR, dollar amount and property type. Brokers can often negotiate for better pricing deals if the loan is large enough and meets the market that a lender is targeting, you may not be able to get that through these lenders.
As to whether a broker will know is a different issue, like any other profession, there are some excellent and knowledgeable brokers, some who are investors themselves and know what is required. There are also some that just operate as bank agents, using only one or perhaps two lenders and are just paper processors. Most brokers just focus on the owner-occupier market and have little knowledge of what is required for an investor, so do your research and ask the questions.
Other comments made above are valid, do your research first.
Good luck with it.
Greg
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