Do I qualify for a 97% investment loan?

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grubber
Posts: 5
Joined: Mon Mar 16, 2015 6:38 pm

Do I qualify for a 97% investment loan?

Post by grubber »

Hello mortgage experts,

After thinking about it for a couple of months I’ve finally decided to buy a second investment property. I’m looking to buy a 2-bedroom property worth around $400,000. I need to borrow at least 90% of the price of the property to be able to afford the property.

I'm familiar with 90% investment loans, even up to 95% investment loans. However, I recently learned about 97% investment loans. What are the qualifying criteria for this type of loan?

Regards.

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Otto Dargan
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Re: Do I qualify for a 97% investment loan?

Post by Otto Dargan »

Hi and welcome to the forums grubber,

High LVR (Loan to Value Ratio) investment lending, especially 97% investment loans, involves a number of risks. This may be why lenders generally require borrowers to meet strict criteria to be able to borrow.

Some of these criteria include:
  • A 3-5% deposit: You may need to have have 3-5% of the purchase value saved as genuine savings. You may be able to find some lenders that will accept equity in another property as a deposit.
  • Sufficient income: You may not need to earn a big income to qualify for a 97% investment mortgage but you will need to be able to afford the mortgage repayments as well as other commitments you may have, such as bills and existing debt, without any hardship.
  • Strong employment history: You’ll need to have been in your current job for at least 6 to 12 months. However, this requirement may be mitigated if you have existing history in the same industry.
  • Clean credit history: To make sure that your credit file is clear of black marks, make it a habit to pay your bills, rent, credit card repayments and other commitments on time over a period of 6 months. Too many credit enquiries may also damage your credit file.
  • Little to no debt: Lenders generally prefer borrowers who don’t have a lot of debt so having multiple credit cards or personal loans may work against you when you apply for a 97% investment loan.
Cheers,
Otto
Otto Dargan
Mortgage Broker
P | 1300 889 743
Home Loan Experts

grubber
Posts: 5
Joined: Mon Mar 16, 2015 6:38 pm

Re: Do I qualify for a 97% investment loan?

Post by grubber »

Hey Otto,

Thanks for the response, especially for the to-the-point reply! I’ve already paid off the loan for my first property and there were no issues involved.

You’ve mentioned that I need at least 3-5% genuine savings. If I haven’t saved the amount what others sources are considered as genuine savings?

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Otto Dargan
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Re: Do I qualify for a 97% investment loan?

Post by Otto Dargan »

Hi grubber,

Genuine savings is the money that you’ve held in your savings account for a certain period. The following may be considered as genuine savings:
  • Money that you’ve saved in your savings account over the last three months.
  • Money held in a term deposit for over three months.
  • Equity in an existing property (accepted only by 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’re able to refrain from spending the money while other lenders may require your savings to increase over time.

Some lenders may not approve your loan unless you make some savings of your own in order to make sure that people don’t try to use a gifted deposit as genuine savings. If you’re currently renting then some lenders may consider the rent you’ve paid in the last 12 months as genuine savings.

You can learn more about borrowing 97% to invest in property by going through our website. You can also call us on 1300 889 743 or fill in our free assessment form and speak with one of our mortgage brokers today.

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

grubber
Posts: 5
Joined: Mon Mar 16, 2015 6:38 pm

Re: Do I qualify for a 97% investment loan?

Post by grubber »

Hey Otto,

Thanks for all your help. I’m not renting but I believe I’ve got enough equity in my first property to complete the genuine savings criteria. I’ll give you a call in the arvo to speak with one of your mortgage brokers about my situation.

Regards.

bebot
Posts: 7
Joined: Thu Mar 12, 2015 5:55 pm

Re: Do I qualify for a 97% investment loan?

Post by bebot »

Good afternoon experts,

I’m planning to buy an investment property. I happened to run into this post because borrowing 97% of the purchase price sounded pretty attractive. However, it’s completely new to me so I don’t know anything about it.

How do 97% investment loans work?

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Otto Dargan
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Re: Do I qualify for a 97% investment loan?

Post by Otto Dargan »

Hi bebot,

There are only a handful of specialist lenders who will allow you to borrow 97% of the purchase price. However, when you’re borrowing more than 80% of the property value the lender may charge a one-off fee known as Lenders Mortgage Insurance (LMI), a cost designed to protect the lender from loss in the event that you default on your mortgage repayments.

In addition to this, you may need to pay this cost upfront, along with the other costs of completing a property purchase such as stamp duty and conveyancing fees.

Despite this, in a 97% investment loan, the cost of LMI is “added” or capitalised on top your mortgage. So although you won’t avoid LMI completely, a 97% investment loan means:
  • You won’t need to pay the LMI upfront.
  • Your LMI will be paid off with your normal mortgage repayments at no interest.
  • You won’t need a big deposit to complete the investment because you’ll be saving thousands upfront.
If you want to learn more about 97% investment loans then you can browse through our website.

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

bebot
Posts: 7
Joined: Thu Mar 12, 2015 5:55 pm

Re: Do I qualify for a 97% investment loan?

Post by bebot »

Your website has a lot of info on 97% investment loans and other loans too. It’s really helpful. I’m planning to apply for an investment loan next month. I’ll give you a call if I decide to proceed with a 97% investment loan. Thanks so much for your help mate.

Cheers.

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