What discounts can I get?
Recent regulatory changes have seen banks slow down on investment lending meaning borrowing more than 80% of the purchase price or Loan to Value Ratio (LVR) is more challenging than ever.
Despite this, there are banks and lenders who can help you borrow up to 85% LVR.
The great news is that if you have a 15% deposit, you may even be able to qualify for interest rate discounts and waived Lenders Mortgage Insurance (LMI).
Do I qualify for an 85% investment loan?
To give yourself a good chance of getting your 85% investment loan application approved, make sure you have:
- A clean credit history: Your credit history should be clear of defaults, judgments and bankruptcies. Missed repayments over the last 6 months or too many credit enquiries will also reduce your chances of approval.
- A sufficient deposit: You’ll need a 15% deposit with at least 5% in genuine savings, which most lenders accept as a deposit that you’ve saved in a bank account for at least 3 months. However, some lenders can consider a gift from your parents or a lump sum deposit as evidence of savings.
- Stable employment: In most cases, you’ll need to have worked in your current job role for at least 3 to 6 months. If you’ve changed jobs, most lenders will want you to have been working in the same industry for the past 2 years.
- Excellent income: When it comes to 85% investment loans, banks tend to be a bit more conservative so you’ll need to show that you earn a significant enough income to meet the mortgage repayments. If you can prove that you have a strong income then some lenders may even take negative gearing into account.
- Standard investment property: It’s much more difficult to get approved if you’re looking at investing in an unusual or non-traditional property type such as those located outside of capital cities or major regional locations.
Our mortgage brokers are 85% investment loan specialists and, with their vast industry experience and knowledge, we can prepare a strong mortgage application for you with the right lender.
Call us on 1300 889 743 or fill in our free assessment form today.
Can I take out an 85% investment loan with a major bank?
Recently, the Australian Prudential Regulation Authority (APRA) introduced some changes that now require banks and lenders to hold a specific amount of capital in the event of a significant property market crash.
APRA‘s concerns over the level of lending to investors has effectively meant that banks are making it tougher for investors to borrow more than 80% LVR. In fact, a couple of banks have capped their investment loans at 80% LVR.
Despite this, you can still get an 85% investment loan from a few major banks and lenders.
How do I qualify for a no deposit investment loan?
A guarantor loan is where your parents or a close relative uses their property as security for your mortgage meaning you can borrow up to 105% of the purchase price of an investment property, which includes the purchase price plus the costs that come with buying a property such as stamp duty and conveyancing fees.
If you don’t have a 15% deposit but you still want to take out an 85% LVR investment loan, there are some non-bank lenders who can help you out.
Can mortgage exposure limits see my investment loan declined?
Do you own a few investment properties already?
If you have more than $1 million in total debts and loan facilities with a single bank then you’ve likely exceed your mortgage exposure limit with that lender. This means most banks will be very wary about lending money to you.
Like banks, LMI providers also have their own exposure limits. Generally speaking, an exposure limit of up to $1 million is accepted but a mortgage broker may be able to help you negotiate this to a maximum of $2.5 million.
Most banks may quickly reject your investment loan application but we know a few lenders that will accept up to $10 million in mortgage exposure.
If you’re in this situation and need help finding the right lender, complete our free assessment form to speak with one of our highly experienced mortgage brokers.
If you haven’t quite got to this stage yet but you’re looking at buying multiple investment properties in short amount of time and want to avoid exceeding mortgage exposure limits, get in touch with us anyway and we can help you avoid this so you can continue building your portfolio without the headache.
What if I have a bad credit history?
Since any investment loan for 85% LVR is considered to be a high risk, banks and lenders tend to be very particular about the types of borrowers they will lend to.
For example, your investment loan application may quickly be rejected if you’re found to have impaired credit. However, some lenders may accept your application as long as your bad credit issues are for paid debts under $1,000.
For credit files that have missed payments or defaults over $1,000, you may be able to take out an investment loan through a specialist lender.
Are interest rate discounts available on an 85% investment loan?
Yes! Compared to a 90% investment loan, more lenders are likely to offer interest rate discounts.
As has always been the case, and even more so since the slowdown in investment lending, investment loans come with a higher interest rate than a standard owner-occupied home loan.
Despite this, having a 15% deposit, in addition to you meeting additional requirements, may see you qualify for an interest rate discount.
These additional lender requirements generally include having complete documentation of all your income and assets (full doc financials), a stable housing history meaning you must not have moved house on a regular basis and evidence of genuine savings.
Even if you don’t qualify for a reduced interest rate right now, you can refinance your 85% investment loan in 2 to 3 years at a more competitive interest rate.
Are LMI discounts and waivers available?
Did you know that a select few major banks offer LMI discounts and waivers for 85% investment loans?
To qualify for waived LMI or even a no LMI investment loan, you’ll need to meet the following requirements:
- Your credit history must be clear of any blemishes such as court writs, judgments and defaults.
- If you’re an industry professional such as a doctor, lawyer, an accountant or an engineer, you’re more likely to qualify. Specific income requirements apply.
- You can’t borrow more than 90% LVR. Lenders will also want proof of a yearly income of more than $150,000 although it may vary from lender to lender.
- If you’re not a professional or you don’t meet the above income requirements then you’re limited to borrowing 85% LVR in order to qualify for LMI discounts.
Each bank has their own standard variable interest rate but did you know that each mortgage insurer has their own premium rates?
Investors, and any borrower for that matter, don’t really look at LMI rates when shopping for a home loan but by comparing them, you can save thousands of dollars on your 85% investment mortgage!
It’s important to note that most lenders don’t publish their LMI rates to the public so it helps to work with a mortgage broker who can compare LMI providers and lenders for you.
Our mortgage brokers know which mortgage insurers offer competitive LMI rates so call us on 1300 889 743 or complete our free assessment form.
What’s the maximum amount I can borrow?
The maximum amount that you can borrow on an 85% investment loan is capped at $1 million. This is a common LMI restriction but there are exceptions to this.
If you want to borrow more than $1 million, one of our lenders may allow to borrow up to $2 million but only if you can prove that you’re financially strong and can afford the loan.
How can I increase my borrowing power?
You can increase your borrowing power by:
- Applying for an investment loan jointly with a partner.
- Buying a positively geared investment property.
- Applying with a lender that takes a common sense approach to investors.
- Reducing your credit card limit to what you actually need.
- Fixing your interest rate for 3 to 5 years.
What are the costs of investing in property?
When investing in property, you can expect to spend up to 5% of the purchase price in extra costs that come with buying a residential property. These costs include:
- Stamp duty.
- Registration fees.
- Transfer fees.
- Conveyancing fees.
- Mortgage fees.
You can use the property costs calculator to get an accurate estimate of these costs.
What things should I look out for?
Lenders are generally more conservative when it comes to 85% investment loans so there are a few things to bear in mind:
- Many banks may require you to have at least 10% of the purchase as genuine savings instead of the usual 5% that’s required when buying an owner-occupied property.
- Interest rates will be higher for any 85% investment loan compared to an owner-occupied home loan.
- Banks tend to be more conservative regarding the location of the investment property so check out the postcode restrictions page to get an idea of whether your property will be accepted.
- In most cases, banks and lenders won’t use deductible interest (negative gearing) if you’re borrowing more than 80% of the property value. There are exceptions to this with select lenders though.
- Most banks may have restrictions on the total amount you can borrow.
- Most banks may reject your investment loan application if more than 50% of your total income comes from rent.
Apply for an 85% investment loan
Our mortgage brokers are specialists in 85% investment loans. They know how to present a strong case with the right lender so you have a strong chance of getting approved the first time around.
Call us on 1300 889 743 or fill in our free assessment form and find out how our specialist mortgage brokers can help finance your next investment.