Property Investment Loans

Buying your first investment can be exciting and challenging. Buying your 2nd,  3rd or even your 4th will require a well experienced broker that is connected with many banks and is up for the challenge to work with you.  

Property Investment Loans Vutha Thach Mortgage Broker

What are the steps in buying an investment property?

  1. The first steps will be working out your borrowing capacity for your situation 
  2. Understanding your equity level in your existing property or how much savings you need to purchase at the level you want   – could be a combination of both
  • This can involve ordering different bank valuations to try get the most equity release (Cash out)  – I have free bank’s valuation access to assist 

  • Releasing the equity so it’s available for your next purchase (some banks won’t release and want to control the equity release, so its important to understand where to go) 

  • Mainstream banks will want to understand where you are buying, and will work out your capacity to buy before they release your equity. There is only one bank in the market that doesn’t do this and I’ve use this a lot of time to get clients into their 4th or 6th property 

3. Working out your next purchase budget – it’ll be great to stay with the same bank as your equity release but if you are buying your 2nd, 3rd or 6th property, you may not be able to stay with the same bank and rates may increase   (I’m currently testing out a structure that removes these limitations I’m seeing for PAYG clients. Works well with Self-employed if my credit advice is followed at least 1 year in advance to the purchase)

What is Negative Gearing?

  • Banks factor this in when they calculate your ability to borrow for an investment 
  • Mainstream banks typically consider your actual investment rate to work this out
  • There are only 2 banks in the market that will consider your loan assessment rate (actual rate + 3%) when they calculate your borrowing and can greatly boost your borrowing power 

What are the property investment costs

Cost such as council rates, body corporate, water rates, real estate management fees are now added on top of your living expenses by main stream banks, which decreases your ability to borrow. There are some banks with mainstream rates that factor property investment cost within your living expense, which can increase your borrowing levels. 

Mainstream banks will only allow you to borrow up to 90%  of the purchase price/valuation for an investment property, however, there are only 2-4 banks that allow you to borrow 95% plus mortgage insurance that is only accessible to brokers 

Calculations of existing debts/liabilities

How banks calculate your existing home loans or liabilities will be important in increasing your ability to borrow 

  • Mainstream banks typically add buffers to your car & personal loans and existing home loans repayments that can reduce your ability to borrow 
  • There are only 2 banks in the market that will consider your actual repayments and add a small buffer to this, which can dramatically increase your ability to borrow and has been a solution for my many clients to get into their 4th or 7th properties
  • There is currently 1 lender in the market that allows you to put your existing home loans over 35 years at mainstream rates that can assist with lowering your repayment to boost your ability to buy another property 

Using multiple banks to help you buy another property could be the solution you require to reach your 4th or 6th property

Tips to increase your borrowing capacity or allow you to buy another investment.

  • Consider using multiple banks if one is maxed out 
  • Obtain multiple bank valuations so you understand your equity levels  
  • consider banks that will release your equity/cash out without banks control  
  • consider banks that has high DTI policy or no DTI policy  
  • consider banks that use more of your rental income or factored the investment cost within your living expenses  
  • consider banks that calculate negative gearing higher than mainstream banks 
  • consider banks that consider actual repayment if above is exhausted 
  • Consider buying investment under a structure other than your personal name that could remove borrowing in the future  (I am testing limitation of this for PAYG clients, however, works well with self-employed)  
  • Consider buying an investment under SMSF  
  • Keep a budget and manage your cashflows to ensure you can afford to follow the different ways to accumulate properties 

What are typical brokers’ or banks’ advice to increase your borrowing

  • Reduce your credit card limits 
  • Pay out your HECS (I’ve cleverly completed this for clients to allow them to buy another investment)  
  • Increase your income /find another job  
  • Consolidate your debts (personal or car loans) 

 

Property Investment Frequency Asked Questions

  • Yes you can and it is pretty common. This is common where your first or existing property has grown in value, and you release the equity to fund the purchase of the next property . This is what I typically do for existing property owners. Or we can use your family/parent’s property as extra security to fund 100% of the investment purchase There is another way to the above, but will share on initial conversation.

  • when you are buying another investment; you may hear this term. Government has forced banks to ensure the amount of total debt is at an acceptable level to your total income. Each Bank has different levels. When you buy an investment, it typically increases this ratio, so it’s important to find a bank that may not have this restriction or DTI policy that fits into your situation. This could be your main barrier to buy another property.

  • We have access to banks valuation at no cost to you and can provide you with the report if you are curious

  • Those that are working overtime or shift allowance, most main stream banks will only consider 80% of this income, however there are banks that will consider 100% of this and increase your ability to borrow

  • asset writes off and asset depreciation are expenses on paper only. Some banks can add this back as non-taxable income which further increases your ability to borrow. For sole traders, your liabilities in your tax returns such as for truck or car loans, can reduce your ability to borrow. There is only one bank in the market that can ignore liabilities in sole trader tax returns, which can dramatically increase your ability to borrow.

  • If your employer provides a fully maintain vehicle or your business provides this to you and could be for personal use as well; some banks may require a letter to support this but there are some that will accept a broker’s comment and this can add back 5k-6k tax free income and increase your borrowing capacity for another property

  • If your employer provides a fully maintain vehicle or your business provides this to you and could be for personal use as well; some banks may require a letter to support this but there are some that will accept a broker’s comment and this can add back 5k-6k tax free income and increase your borrowing capacity for another property

Enquire about investment property loans today!