Need a loan to buy an investment property

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doremi
Posts: 37
Joined: Thu Jun 20, 2013 7:11 pm

Need a loan to buy an investment property

Post by doremi »

Hey there brokers, I am planning to buy a property for investment purpose. I am thinking of renting it out at $425 per week in the future. Is it harder to be approved for a loan if I want to buy an investment property? What criteria will I need to meet in order to qualify for a loan?

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Otto Dargan
Mortgage Specialist
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Joined: Sat Sep 06, 2008 5:55 pm
Location: Sydney, Australia
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Re: Need a loan to buy an investment property

Post by Otto Dargan »

Hi and welcome to the forums doremi,

You can apply for an investment loans if you are thinking of buying a property for investment purpose. These kinds of loans are generally considered to be of a higher risk than standard home loans which is why you would need to be in a strong financial position to qualify.

Some of the basic lending criteria are:
  • You should have 5% to 10% in genuine savings.
  • If you are borrowing more than 90% then some lenders like to see equity in other properties (i.e. this is not your first investment property).
  • A good credit history.
  • An above average credit score.
  • Stable employment.
Cheers,
Otto
Otto Dargan
Mortgage Broker
P | 1300 889 743
Home Loan Experts

doremi
Posts: 37
Joined: Thu Jun 20, 2013 7:11 pm

Re: Need a loan to buy an investment property

Post by doremi »

You mentioned above average credit score as a criteria to be qualified for an investment loan. Can you tell me what does credit score mean and what are the ways to increase this score?

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Otto Dargan
Mortgage Specialist
Posts: 7730
Joined: Sat Sep 06, 2008 5:55 pm
Location: Sydney, Australia
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Re: Need a loan to buy an investment property

Post by Otto Dargan »

Hi doremi,

A credit score is an automated assessment of how risky your loan application is to a potential lender. This score is calculated entirely by computers using information from your loan application and credit file.

You can use our Credit Score Calculator if you want to check your credit score and see if it is high or low. Please note that this is only an estimate and it should only be used as a guide.

A low credit score may lead to a decline of loan. Some of the common causes for a failed credit score are as follows:
  • Bad credit history.
  • Lack of genuine savings.
  • Instability of address or employment.
  • Missed or late payments.
Some of the steps you can take to improve your credit score are:
  • Not drawing beyond your credit card limit.
  • Making all of your repayments on time.
  • Paying defaults listed on your credit file (if any).
  • Staying in your current job and living address until you apply for your loan.
  • Making regular deposits to a savings account to show that you are good with your money.
It may be easier, in some cases, to approach a lender who does not use credit scoring to get a loan.

If you want to know whether you qualify for a loan or not then feel free to call us directly on 1300 889 743 or fill in our free assessment form.

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

doremi
Posts: 37
Joined: Thu Jun 20, 2013 7:11 pm

Re: Need a loan to buy an investment property

Post by doremi »

Hm..okay. Thanks for sharing the information. I will fill in the form and call you in a day or two.

alexjones
Posts: 34
Joined: Thu Jun 20, 2013 6:50 pm

Re: Need a loan to buy an investment property

Post by alexjones »

Hey, I am also thinking of buying an investment property. I was reading through your posts and I saw you mentioning genuine savings more than once. What is actually considered as a genuine savings??

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Otto Dargan
Mortgage Specialist
Posts: 7730
Joined: Sat Sep 06, 2008 5:55 pm
Location: Sydney, Australia
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Re: Need a loan to buy an investment property

Post by Otto Dargan »

Hi alexjones,

The money that you have held in your savings account for a certain period is seen as genuine savings by most lenders. The following may be considered as genuine savings:
  • Money that you have saved in your bank account over the last three months.
  • Money held in a term deposit for over three months.
  • Equity in an existing property (accepted by only some lenders).
  • Proceeds from the sale of a property (accepted by only some lenders).
  • Shares or managed funds held for three months.
In some cases, lenders may ask you to hold the funds for a total of six months to prove that you are able to refrain from spending the money.

While other lenders may require your savings to increase over time. These lenders may not approve your loan unless you make some savings of your own. This is to make sure that people do not try to use a gifted deposit as genuine savings. If you are currently renting then some lenders may consider the rent you have paid in the last twelve months as genuine savings.

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

alexjones
Posts: 34
Joined: Thu Jun 20, 2013 6:50 pm

Re: Need a loan to buy an investment property

Post by alexjones »

Oh I see. I think I get what genuine savings means now. Thanks for explaining this. Cheers!

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