Eligibility criteria for an 85% investment loan

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superman
Posts: 12
Joined: Mon Mar 16, 2015 6:19 pm

Eligibility criteria for an 85% investment loan

Post by superman »

Hi home loan forum,

I want to take out an investment loan to buy a nearby property. I actually wanted to take out 95% of the property value but I’ve found out that I can’t do so right now because I failed in two of my bank’s requirements. I’d rather wait until I qualify for the 95% investment loan but I don’t want to miss out on the opportunity of a lifetime with the property.

I’m ready to settle for an 85% lend (since I do have a deposit but just wanted to use it for something else). Is there anyone who can state the eligibility criteria for an 85% investment loan? I want to make sure I qualify for the loan... and avoid another credit enquiry on my file :/

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Otto Dargan
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Re: Eligibility criteria for an 85% investment loan

Post by Otto Dargan »

Hi superman, welcome to the forums.

In order to take out an 85% investment loan, your loan application will likely be very highly favoured by most lenders if you have:
  • An adequate deposit - Most lenders may want you to have a 15% deposit with at least 5% in genuine savings but some lenders may even consider a gift from your parents or a lump sum deposit.
  • Stable employment - In order to convey a strong application, you’ll need to have a stable employment. This means you’ll need to have been in your current role for at least 3 to 6 months. A 2-years industry experience may be needed if you’ve changed jobs but you’re in the same industry.
  • Adequate income - For any mortgage of over 80% of the property value, you’ll generally need to prove to the lender that you’re capable of affording the mortgage. This means you’ll need to prove you earn enough to meet the mortgage repayments.
  • A clean credit history - If you have any records of defaults, judgments and bankruptcies in your credit file, most lenders may quickly reject your loan application. Missed repayments over the last 6 months or too many credit enquiries may also lower your chances of approval.
Please keep in mind that the above are simply standard bank requirements. Some lenders may have additional requirements while others may be more flexible.

Also, investing in an unusual or non-traditional property type would turn away most lenders because they prefer standard investment properties, which are readily saleable (in case you’re unable to pay back the loan). For example, properties located outside of capital cities or major regional locations may be difficult to finance.

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

superman
Posts: 12
Joined: Mon Mar 16, 2015 6:19 pm

Re: Eligibility criteria for an 85% investment loan

Post by superman »

Thanks for replying, Otto. I’m thinking that after I get my investment loan, I want to refinance it to a more competitive interest rate, say in 3 years or so. Although it’s some ways down the road, I still want to learn a bit about the refinancing process. Can you tell me anything about that?

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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: Eligibility criteria for an 85% investment loan

Post by Otto Dargan »

Hi superman,

A standard mortgage refinance generally works in the following way:
  • You first look around for a mortgage with the features and facilities you want.
  • After that, you apply with the chosen lender, which is all you’ll need to do. However, with the help of a mortgage broker, you won’t need to do much heavy lifting whether it be shopping around or choosing a suitable mortgage. They’ll also submit your application on your behalf.
  • Because refinancing is the basically the same as applying for a new mortgage, the lender you’re refinancing to will need you to provide standard supporting documents such as your identification, bank statements and payslips/tax returns.
  • After the application has been received, the lender may require that your property be revalued.
  • The lender will submit a discharge form to your state’s Land Titles Office in order to close the old mortgage account.
  • Your new mortgage will be used to pay off your old mortgage.
  • You’ll start paying your new mortgage generally within a month of settlement.
If you want to learn more, have a look at our website. You can also discuss things directly with one of our specialist mortgage brokers by calling us on 1300 889 743 or by filling in our free assessment form.

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

superman
Posts: 12
Joined: Mon Mar 16, 2015 6:19 pm

Re: Eligibility criteria for an 85% investment loan

Post by superman »

Gotcha. I’m really very grateful for your help, Otto. The info you’ve provided (and your amazing website) have been very helpful. I’m sure I’ll be going through your site a lot more in the future. I’ll fill in the assessment form for now and will call you possibly by the end of the coming week. Thanks again.

realneil
Posts: 6
Joined: Mon Mar 16, 2015 6:48 pm

Re: Eligibility criteria for an 85% investment loan

Post by realneil »

Hey everyone,

I‘ve also been very keen on taking out an 85% investment loan. I’d actually thought of taking out 90% but qualifying for an interest rate discount as well as waived LMI seems to be easier the lesser the LVR we borrow. The problem is that I’ve heard that I may not be able to borrow more than $1 on an 85% investment loan. Is this true?

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Otto Dargan
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Re: Eligibility criteria for an 85% investment loan

Post by Otto Dargan »

Hi realneil,

Unfortunately, it’s true that the maximum amount that you may be able to borrow on an 85% investment loan is limited to $1 million. This is a common LMI restriction but you may be able to find some exceptions to this.

If you want to borrow more than $1 million then you may do so by applying for a 90% investment loan instead, since a select few lenders may allow you to borrow up to $2 million if you can prove to be in an exceptionally strong financial position.

If you’re worried about not being able to qualify for an interest rate discount, you may refinance your investment loan in 2 to 3 years, like superman, for a more competitive interest rate.

Besides, if you have genuine savings or you’re using existing equity as a deposit then it’s highly likely that you may qualify for good interest rate offers.

And if you want a low LMI then you’ll probably have the best chances of getting the LMI amount you want or maybe even qualify for waived LMI with the help of a mortgage broker.

If there’s anything else you want to know or you’re confused with something, please feel free to browse through our website or give us a call.

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

realneil
Posts: 6
Joined: Mon Mar 16, 2015 6:48 pm

Re: Eligibility criteria for an 85% investment loan

Post by realneil »

Okay… I’ll weigh in the pros and cons of it all and get back to you. Thanks for your quick reply.

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