Are they still available?
Up until a recent crackdown by the Australian Prudential Regulation Authority (APRA), buying an investment property with a 10% deposit was a relatively straightforward process with most banks, as long you met standard ‘serviceability’ criteria.
Today, a number of major banks have limited the number of 90% LVR (Loan To Value Ratio) they will approve. Luckily, there are non-bank lenders who can help you borrow the amount you need to achieve your investment goals.
Can I borrow 90% LVR?
If you can meet the below criteria, you’ll have a much better chance at getting approved:
- Clean credit history: Having such blemishes as defaults, judgments and bankruptcies on your credit file can work against you when applying for a 90% investment loan but not with all lenders depending on your case.
- You’ll need a deposit: In most cases, you’ll need 5% of the purchase price in genuine savings or a deposit that you’ve saved over a period of 3 to 6 months. There are exceptions to this with some lenders and you may be able to use equity in an existing property your own or a gift.
- Negative gearing may be accepted: Only applicable with some lenders and only if you have a strong income.
- Employment: Although there are exceptions to this policy, you’ll usually need to have an employment history of 3 to 6 months in your current job role.
- Standard properties more likely accepted: Unusual or non-traditional property types located outside of capital cities or major regional locations are not usually accepted by lenders.
We’re 90% LVR investment loan experts and we know exactly how to build a strong case so you have the best chance of getting approved the first time around.
Call 1300 889 743 or complete our free assessment form today.
Are the banks still offering 90% investment loans?
To curb what they believed to be a ‘property bubble’ in Australian property market, the financial watchdog, APRA, introduced changes requiring banks and lenders to hold a certain amount of capital in case of a market crash.
As part of these changes, banks, building societies and other Authorised Deposit-taking Institutions (ADIs) have been required to limit high LVR investor lending, specifically, 90% investment loans and higher.
If you don’t have a 10% deposit though, it doesn’t necessarily mean the end of your real estate investment plans.
Borrow 90% LVR with a non-bank lender!
Did you know that not all lenders are overseen by APRA?
Some non-banks and specialist lenders are not actually ADIs so, at least for the time being, they’re in a unique position to help Australia borrow up to 90% of the purchase price or more to invest in property.
We know who these lenders are and we know which of them will allow you to borrow up to the maximum LVR based on you meeting standard loan requirements.
Adding to your property portfolio?
If you’re building on top of your existing property portfolio, beware.
As a result of these changes, very few lenders take into account negative gearing benefits when assessing your income position.
In addition to this, banks will now assess your existing loan facilities at a higher or buffer interest rate than what you’re actually paying.
This has a massive impact on the borrower power of applicants who already own multiple investment properties or who are simply purchasing a second investment property.
Do you need help getting approved with a lender that takes a common sense approach?
Please call us on 1300 889 743 and we can tell how we can help.
Do you qualify for an interest rate discount?
Borrowers that have genuine savings or are using existing equity as a deposit usually qualify for really good interest rate offers.
So what if you don’t qualify for a reduced rate?
Firstly, it’s widely believed that specialist lenders charge a premium for their services. That’s true but when you look at the investment loan package as a whole it’s actually not that much different than going with a bank.
Secondly, our main concern is getting you approved for a 10% deposit investment loan. Once we do that, we can always refinance your investment loan in 2 to 3 years at a more competitive rate.
How do I get cheap mortgage insurance?
Risky mortgages, particularly when you’re lending more than 80% or more of the purchase price, will require you to cover Lenders Mortgage Insurance (LMI).
LMI basically protects the banks in case you default on your investment loan and the cost can vary add up depending the LMI premium rates of the lender that you’re applying with and the amount that you’re borrowing.
For example, for a $400,000 property on a 90% investment loan, you could be paying almost $12,000 in LMI. Use the LMI calculator to get an accurate figure of how much you could be paying in LMI for the property you want to invest in.
What you may like to is save a little more for your deposit and bring your LVR down to 94% plus LMI. This will put you in a lower LMI bracket which means you’ll reduce your mortgage insurance premium.
Another strategy is to capitalise or ‘add’ the LMI premium on top of your investment loan, bringing your total loan to about 92% LVR.
What it means for you is that you avoid having to pay LMI upfront and simply pay it off, interest-free, as you start making your mortgage repayments.
Which lender is best for LMI?
This is a hard question to answer fundamentally because banks don’t share this information to the public so it’s almost impossible to shop around if you’re trying to do it by yourself.
Luckily, as a mortgage broker, it’s a part of our job to first qualify you for a mortgage and then, secondly, compare the associated fees of a particular lender, including their LMI premium rates, in order to find the best possible deal for your situation.
What you’ll really want to avoid is going over the so-called ‘LMI limit’ with the particular lender you want to apply for.
This refers specifically to the exposure limits for mortgage insurance providers. Most will accept up $750,000 for one security and up $2.5 million for 3 or 4 properties.
Call us on 1300 889 743 and find out what we can do for you.
Is it possible to borrow more than $1 million?
Unless you have other investment properties to use as security, there is a $1 million limit for 90% investment loans with most lenders. This is a common mortgage insurer restriction but it really depends on the lender.
One of our lenders on our panel, for instance, has an agreement with their mortgage insurer and can consider a 90% LVR investment loan up to $2,000,000 for borrowers in an exceptionally strong financial position.
On top of that, you can go up to $1.5 million and borrow a little bit more than 90% LVR to cover your LMI.
Will mortgage exposure limits stop me from borrowing?
Generally speaking, you can’t have more than $1 million in total debts and loan facilities with any one bank. This is known as your mortgage exposure limit and it can catch a lot of borrowers out, specifically when they’re trying to build a property portfolio.
Depending on the cost of the investment properties you already own, you could quickly be declined by most banks but there are some lenders will accept up to $10 million in exposure.
We know who these lenders are!
Tips on increasing your borrowing power
- Reduce your credit card limits to what you actually need.
- Apply for loans jointly with your spouse. In this way, all of your income can be used.
- Buy positively geared investment properties.
- Apply with a lender that takes a common sense approach to investors.
- Fix your rate for three to five years.
Why should I invest in property?
You could easily consider buying and investing in property as Australia’s past time but why is it so popular.
Well, compared to other types of investments that are subject to fluctuations in the stock market, property tends to be a solid, long term generator of income.
The price of your property can rise substantially especially if you buy in a good location. Where you adopt a strategy for long term growth, you will most likely reap the benefits in the following years.
What about the costs of owning a property?
Any expenditure on the property, including maintenance, rates and insurance, is usually tax deductible. The other major tax benefit is negative gearing.
What are the costs of investing in property?
- Conveyancing fees.
- Transferring property title.
- Valuations (essential when doing your due diligence on a property).
- Stamp duty.
To get an accurate estimate of these costs, use the property costs calculator.
Speak to a mortgage broker today
Getting approved for a 90% investment loan comes down to presenting a strong case to the right lender, something our mortgage brokers do on a daily basis.
Let us help you get started in property investing!
Call us on 1300 889 743 or complete our free and easy assessment form today.