Getting Approval for Your Home Loan

Tuesday, March 12th, 2019

With some of Australia’s leading cities showing a decline in property markets, it is a positive opportunity for savvy investors to jump in and take advantage of lower than normal property prices – that’s if you can meet the loan approval requirements to get your mortgage application over the line.

The fact is that many banks and lending institutions have been tightening lending criteria – something that looks set to continue in the wake of the recent banking Royal Commission.

The good news, though, is that borrowers can still find lenders happy to help their property investment dreams come true – provided they tick the boxes as a low risk.

To help you boost your chances of getting your home loan approved, without the stress, try these options for a fresh perspective on effective borrowing:

Multi-lender Investment Strategy

Many mortgage-broking specialists recommend that you refinance your portfolio of properties by choosing lenders that offer low interest rates. Then, with that as your starting strategy, you may be in a position to buy your next investment property using a lender that enables you utilise the equity in those properties. Any subsequent investment property loan can then be with a different lender that allows you to borrow the maximum amount available within your budget. It’s a tactic that suits some people well – provided those all-important numbers are crunched carefully. Investors using this method can often benefit by borrowing at a rate that is, on average, relatively low, across all the properties. Now could be the perfect to buy whilst the market is experiencing a downturn.

It is critical to speak to your accountant and an experienced mortgage broker to ensure you understand the risks and exit strategies should your financial circumstances change, but the benefits of a well-planned multi-lender strategy can be tangible, as you spread your risk across multiple property purchases and are able to keep borrowing because your mortgage exposure with any single lender is reduced.

Interest-Only vs P&I

When you choose an interest-only loan, the reality is that most lenders reduce the maximum amount you can borrow. The reason behind it is a complex one that has to do with the fact that lenders assess your existing mortgage differently than the way they assess your new home loan.

For some borrowers with interest-only conditions on existing loans, it’s best to choose new loans as both principal and interest (P&I). Underpinning any decision you do make, however, should be the consideration that strategies such as this one should be thought about carefully. Unless you are in a position to sell a property if interest rates did increase, it may not be the smartest choice.

Talking to an experienced mortgage broker about the difference between interest-only loans and P&I loans is always recommended – and running those insights past your accountant gives you access to a second opinion from someone who has your positive financial wellbeing at heart.

Ultimately, the decision may hinge on whether you’re focused on a long-term rental income strategy or are thinking more about capital growth strategy in the short-term.

High Rental Yield Rocks

Borrowing power for property investors takes in a number of factors and these still include rental income – good news for investors keen to increase their property portfolio.

To truly maximise your borrowing power in a way that’s sustainable and low-risk, though, requires a clear strategy about what properties to buy.

There are lots of things to think about.

Dual-occupancy addresses, including townhouses and units in desirable locations usually offer higher rental yields – and that means more of your mortgage is looked after by steady rental income.

For borrowers keen to meet the tighter criteria lenders are putting into practise, it can be the edge you need to get your mortgage application approved.

Get The Right Advice

There are many other strategies you can utilise to help improve your chances of loan approval as a property investor, including strategic refinancing that can give you access to the funds you need, while bank valuations are still solid.

No matter what approach you are keen to explore, consultation with an experienced loan broker is critical. With the right advice today, you can put yourself in a strong position for tomorrow.

To find out more about your borrowing options, talk to our loan broking professionals at Loans Actually today.

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