Can I qualify for an investment loan?

Any general questions you might have in regards to loans and finance.
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Kubuki
Posts: 42
Joined: Fri Jul 26, 2013 7:02 pm

Can I qualify for an investment loan?

Post by Kubuki »

Hey everyone. I'm a sales director from Newcastle. As my business is blooming, I’m considering investing in a new property. For this I would have to take out a loan but I’m not sure if I qualify for that. Some of my friends advised me to apply for an investment loan. Could anyone tell me more about investment loans and whether I will qualify for one?

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Otto Dargan
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Re: Can I qualify for an investment loan?

Post by Otto Dargan »

Hi and welcome to the forums Kubuki.

The approval criteria can be complicated for investment loans especially if you need to prove that you can afford the loan through negative gearing. These type of loans may pose higher risks to lenders than standard home loans. Therefore, you need to be in a strong financial position to qualify.

In order to qualify for an investment loan, you need to have a deposit of 5% to 10% in genuine savings. In case you’re borrowing over 90% of the property value, some lenders may want to see equity in other properties. You must also have an above average credit score as well as a clear credit history. Most lenders require you to have a stable employment. If you meet these criteria then you may be eligible for an investment loan.

Cheers,
Otto
Otto Dargan
Mortgage Broker
P | 1300 889 743
Home Loan Experts

Kubuki
Posts: 42
Joined: Fri Jul 26, 2013 7:02 pm

Re: Can I qualify for an investment loan?

Post by Kubuki »

Hey, Otto. Thanks for the informative reply! I may be qualified for the loan after all. However, I want to borrow a very large amount. Can you give me some advice on how I can increase my borrowing capacity?

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Otto Dargan
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Joined: Sat Sep 06, 2008 5:55 pm
Location: Sydney, Australia
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Re: Can I qualify for an investment loan?

Post by Otto Dargan »

Hi Kubuki,

You may be able to increase your borrowing power if you follow these tips:
  • Apply with a lender that has favourable lending criteria for investors.
  • Reduce your credit card limits.
  • Apply for loans jointly with your spouse so that all of your income can be considered.
  • Buy positively geared investment properties.
  • Fix your rate for three to five years.
Lenders assess investment property loans differently than normal home loans. Your capacity to borrow may depend on your specific situation:
  • Most lenders use only 80% of your rental income in their assessment. However, some may consider the entire income.
  • All lenders assess your base salary in the same way. However, they differ in the way that they assess other sources of income, such as overtime, bonuses, commission, allowances, trust distributions, dividends and self employed income.
  • Most banks add up to 2% to the current rate while calculating your borrowing capacity to make sure you can afford the loan if the rates were to increase.
  • Some banks may assess the repayments on your existing debts using principal and interest repayments, even though you’re paying interest only.
  • In case your portfolio is not positively geared, you may want to find a lender who can include negative gearing benefits in a serviceability calculation.
With the help of our Investment Property Calculator, you can get an idea of the weekly cash flow position of your next investment to see if your property will be positively or negatively geared.

If you would like to know more about these then you can check out our website. We can also be reached on 1300 889 743 or you can fill in our free assessment form to see if you qualify for a loan or not.

Cheers,
Otto
Otto Dargan
Mortgage Broker
P | 1300 889 743
Home Loan Experts

Kubuki
Posts: 42
Joined: Fri Jul 26, 2013 7:02 pm

Re: Can I qualify for an investment loan?

Post by Kubuki »

Thank you so much, Otto! You've been really helpful and I’m really grateful for that. I’ll call you in a couple of days when I get started on my loan application.

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albee
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Re: Can I qualify for an investment loan?

Post by albee »

Hello home loan experts,

I recently took out a loan to buy a building. One of my colleague was trying to explain to me about the depreciation on my building. I had never really thought about it. He mentioned that I could claim a percentage of the property price but he mentioned a small percentage, somewhere around 1-2%.

Can anyone explain to me the depreciation for my building? Is the small amount worth my time?

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Otto Dargan
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Joined: Sat Sep 06, 2008 5:55 pm
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Re: Can I qualify for an investment loan?

Post by Otto Dargan »

Hi albee,

Owners seldom claim the depreciation for plants, equipments and buildings. You may normally be able to claim a small percentage of the cost of the building and fixed structures on the property over time. The usual rate for depreciation is 2.5% from the time the building is built. The total claim is, however, limited to the cost of construction and you may need to hire a quantity surveyor to calculate the figures for you.

You may think that it’s too much of a hassle for something so small. However, consider this scenario - you’ve just bought a house for $600,000 today and the cost of that house was $250,000 when it was built in 2000. You will then be able to claim an extra $6,250 every year against the rental income until 2040.

Cheers,
Otto
Otto Dargan
Mortgage Broker
P | 1300 889 743
Home Loan Experts

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albee
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Joined: Wed Apr 07, 2010 12:04 pm

Re: Can I qualify for an investment loan?

Post by albee »

Thank you so much for the information, Otto. I didn’t know depreciation claims could be so important. I might have overlooked it if I hadn’t consulted you. I still need to understand it better. I’ll contact you in the near future to discuss more on depreciation and other claims that I could be entitled to.

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