Has Your Investment Loan Borrowing Power Suffered?

Published by Otto Dargan on December 3, 2018

Some of Australia’s best performing cities have been in decline for the last six months which means it’s a great opportunity for property investors to take advantage…if you can get approved for a home loan.

Banks have tightened their lending criteria and borrowing is much tighter but by being strategic, you can keep your investment train moving.

Use a multi-lender investment strategy

Top mortgage brokers recommend that you refinance your property portfolio with lenders that will charge you a low interest rate.

After that, you can buy your next property using a lender that allows you to borrow more but at a slightly higher rate.

Your last property can then be purchased with the lender that allows you to borrow the most.

By using this method, your average rate remains low but you can buy now while the market is down.

The other benefit of a multi-lender strategy is that you effectively spread your risk and can continue borrowing because you’re reducing your mortgage exposure with any one single lender.

Think hard than ever about P&I vs interest only

Did you know that most lenders reduce the maximum amount that you can borrow if you choose an interest only loan?.

It’s actually a bit more complicated than that as the way lenders assess your existing loans is different to the way that they assess your new loan.

In some cases, it’s better if your existing loans are interest only and your new loan is principle and interest (P&I).

Borrowing responsibly is important and you should only consider strategies like this if you are willing and able to sell a property if interest rates were to increase.

Check out the P&I versus interest only page so you can make an informed decision.

Typically, the choice comes down to whether you’re pursuing a long-term rental income strategy or a short-term capital growth strategy.

Choose properties with a high rental yield

The good news for property investors is that banks still accept rental income when assessing your borrowing power. At least that hasn’t changed!

However, the key to maximising your borrowing power potentially means being more strategic with the properties that you choose.

For example, dual occupancy, townhouses and units in select locations tend to have higher rental returns (yields) which means more of the loan is covered by the rent income.

It can give you the edge you need to get your investment loan approved!

Refinance high and buy low

The Sydney property market, in particular, has had large gains in the last 5 years, so now is a good time to refinance as bank valuations will come in higher than they did a few years ago.

You can then choose to delay buying a property by a few months to take advantage of lower prices in 3-6 months time.

Speak to an experienced mortgage broker

Our mortgage brokers have assisted both first-time and sophisticated investors to rapidly grow their real estate portfolios with a mortgage strategy that matches their long-term goals.

Call us on 1300 889 743 or fill in our online enquiry form and discover how we can help you take advantage of Sydney’s market downturn.