Andrew Heath of Mortgage Choice Richmond looks at how the landscape has changed for property investors, making it more important than ever to partner with a mortgage broker.
I was recently asked to provide commentary for a Money Magazine
feature on applying for an investment loan, and it occurred to me that many people looking to buy a rental property in Richmond or Windsor may be unaware of the current situation. With this in mind, let me share with you an update on what property investors need to bear in mind when applying for a loan.
We’ve gone back to ‘the old days’
The actual process of completing a loan application doesn’t differ too much between investors and owner occupiers – and as your Richmond Mortgage Choice broker, part of my job is to help you through the process.
However in late 2014 and mid-2015, the Australian Prudential Regulation Authority (APRA) introduced initiatives to limit investment lending in order to support sustainable price growth and avoid a property market bubble. The thing is, APRA didn’t specify exactly what steps lenders should take, and this has seen a variety of approaches among different banks.
The result broadly, is that we’ve gone back to the way things were 15 or so years ago when lenders wanted to see more of a deposit - and charge a higher rate - for investment loans than for owner occupied home loans. No two banks have the same investment lending policies, and you could get the thumbs down from one lender only to have your loan wholeheartedly approved by a different lender.
Hence the need for the expert support of my team of Richmond home loan specialists.
Three key issues still apply
What I call the ‘holy trinity’ of borrowing still applies. Lenders will focus on three key areas – your deposit, your income, and your other financial commitments like, say, credit card debt or a car or personal loan.
The size of your deposit can be especially critical. One point often overlooked in the media is that while home owners can use home equity in lieu of a cash deposit, lenders still want to be sure the borrower has sufficient income to service the loan.
Choose your property with care
The investment property you choose matters too. It may be a competitive market but some lenders are pickier about the type of property they will lend against than others. Some won’t lend against apartment properties exceeding four storeys in height; others won’t consider interstate properties.
It all comes down to doing your due diligence. Treat your Richmond investment property as a business proposition - gather as much information as possible, talk to my team of Richmond mortgage brokers, and be sure you can secure competitively priced finance before you sign the contract of sale.
For more insights on securing a loan for an investment property in Richmond, call me, Andrew Heath at Mortgage Choice Richmond on 02 4578 9904 or call in and see us at Shop 1/37 Lennox Street Richmond, NSW.