How do I qualify for a co-ownership investment loan?

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rickieg
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Joined: Thu Mar 12, 2015 5:38 pm

How do I qualify for a co-ownership investment loan?

Post by rickieg »

Good afternoon home loan experts,

I’m a truck driver in a transport company and I earn around $68,000 per year. My girlfriend is a draftsperson and she earns around $55,000 annually. We want to invest in a house in Bourke as co-owners. We’re not sure how the banks will consider our application.

Can anyone here explain to us what do we need to qualify for a co-ownership loan?

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Otto Dargan
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Re: How do I qualify for a co-ownership investment loan?

Post by Otto Dargan »

Hi and welcome to the forums rickieg.

From a lending perspective, banks see co-ownership loans the same as any other standard investment loan. There isn’t a higher risk involved with this type of loan: the only difference is in how the loan is set up.

What that means for you and your co-borrower is that you won’t have to meet exceptionally difficult requirements in order to get approved. To qualify, you’ll generally need:
  • A sufficient deposit: For the home loan as a whole, you’ll need to have a deposit of at least 5% of the property value as genuine savings between you and your co-borrower. Some lenders will accept a no deposit option such as a gifted deposit to make up the amount required but third party guarantors are not accepted. Find out more.
  • To be purchasing an acceptable property: Most lenders have restrictions relating to the type of property that you want to buy as well as its location. As long as you’re buying a standard property or unit in or near a metro/city location, you should be fine.
  • A stable job: You and your co-borrower need to have stable employment with at least 3 to 6 months history in your respective jobs.
  • A good income and asset position: Your income and asset position must reflect your current age and the number of years you’ve been working as well as be sufficient enough to meet standard serviceability requirements set by the bank. “Serviceability” means you’re capability in meet your mortgage repayments for the amount you’re borrowing.
  • A good credit history: Although it will help your case if your credit file is clear of black marks like defaults, judgments, bankruptcies and a high number of credit enquiries, there are exceptions if you can build a strong case with the right lender. A mortgage can help you do this.
  • A like-minded co-borrower: This isn’t a lending requirement per se but a co-ownership investment loan only works if you’re able to go into mortgage with someone you trust, with the character and capacity to make their mortgage repayments and someone who shares your investment goals, such as, when you would like to sell the property.
Cheers,
Otto
Otto Dargan
Mortgage Broker
P | 1300 889 743
Home Loan Experts

rickieg
Posts: 10
Joined: Thu Mar 12, 2015 5:38 pm

Re: How do I qualify for a co-ownership investment loan?

Post by rickieg »

I’m surprised to get such a prompt reply. I believe we can meet these requirements without much difficulty. So how much can we borrow?

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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: How do I qualify for a co-ownership investment loan?

Post by Otto Dargan »

Hi rickieg,

Like a standard investment loan, your borrowing power will be determined by the strength of your application. There are no specific limits on the Loan to Value Ratio (LVR) that you’re eligible for or the amount you can borrow to.

In saying that, your borrowing capacity will be equally determined by the strength of your co-borrower. If they fall short on some of the eligibility criteria, it will affect the amount you can borrow so it’s worth you and your co-borrower each getting a proper assessment from a qualified mortgage broker before applying for a shared equity loan.

As long as you and your co-borrower are in a good financial position, have a high income and stable employment, you can potentially borrow up to 90% to 95% of the property value with select lenders.

For more information on co-ownership investment loans, please go through 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

rickieg
Posts: 10
Joined: Thu Mar 12, 2015 5:38 pm

Re: How do I qualify for a co-ownership investment loan?

Post by rickieg »

That’s such a good news! I’ll share this with my girlfriend. We’ll give you a call tomorrow afternoon to immediately go ahead with our investment loan. Cheers!

ladygaga
Posts: 9
Joined: Thu Mar 12, 2015 5:37 pm

Re: How do I qualify for a co-ownership investment loan?

Post by ladygaga »

Hey there,

I’m also planning to take out a co-ownership investment loan to purchase a property with my brother. I learnt a lot about this loan from the posts here.

Can anyone help me as well and explain to me how the loan is set up?

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Otto Dargan
Mortgage Specialist
Posts: 7729
Joined: Sat Sep 06, 2008 5:55 pm
Location: Sydney, Australia
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Re: How do I qualify for a co-ownership investment loan?

Post by Otto Dargan »

Hi ladygaga,

Once the property share loan is approved by your bank, you can choose to set up you loan facility as you wish (based on your eligibility for particular home loan features), including choosing a professional or basic package, choosing to fix your interest rate or not or choosing to have a 100% offset account.

While each party can choose the payment schedule that fits their needs (fortnightly or monthly repayments), each loan facility must have the same loan period i.e. one of the loan facilities can’t be for 20 years and the other for 30 years.

In addition, there can only be a maximum of two loan facilities on the one property, although each facility can have multiple borrowers.
  • Lower upfront costs: You can split the costs of purchasing the property including the deposit, legal fees, stamp duty, building reports, LMI and other fees.
  • Ongoing costs: There are ongoing costs of owning property, whether it’s an investment or not. These costs include rates, repairs and renovations. With a co-borrower you can share these costs together.
  • Pay off the mortgage faster: With each borrower focusing on paying off their share of the mortgage, the loan can be paid down a lot of faster than a typical investment loan. Just be sure to check that you won’t incur break costs for paying too much of your loan off in a short amount of time.
  • Get the same interest rates as a standard borrower: You won’t pay a premium interest rate with a co-ownership investment loan. Your interest rate will be based on the amount you’re borrowing and the risk of all the borrowers involved in the application.
Cheers,
Otto
Otto Dargan
Mortgage Broker
P | 1300 889 743
Home Loan Experts

ladygaga
Posts: 9
Joined: Thu Mar 12, 2015 5:37 pm

Re: How do I qualify for a co-ownership investment loan?

Post by ladygaga »

Thank you for clearing this up for me. I’m so glad that I followed my friend’s advice and looked into this forum. I’ve got so much useful information out of this forum and your website. We have decided to go ahead with the investment loan. I’ll give you a call sometime next week. See you!

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