Best Criteria Required for Applying an Investment Loan

How Much can I Borrow for Investment?

Have you ever thought that? Getting approval for an investment loan is quite complicated in Australia, and this type of loan has high risks than usual home loans. Qualifying for an investment loan can be a tough task, but it is not impossible. By saving up sufficient cash reserves and improving your credit score, you can certainly put yourself in a good position to make you eligible for an investment loan in Australia.

What is an Investment Loan

Many things are there to consider if you plan to invest in property. Whether you plan to invest in a property for the first time or add to your portfolio, you can find attractive investment loans. Many people might not understand what an investment loan is. It is also a type of home loan to purchase a property with the intention of investment. The buyer cannot use this property for residential purposes but can rent it out or retain it for capital growth. Investment loans are also available for investing in your business. Compare the investment loan rates with different lenders before you apply for this loan.

How does an Investment Loan Works?

As a borrower, you might be interested to know how do investment loans work. It works the same way as normal home loans. Banks or lenders will lend a certain amount to you with a fixed or variable interest rate. You will need to pay off both principal and interest over the life of the loan in regular installments. Even if it works as a home loan, you can see a few major differences between these two types of loans. The investment loan interest rates are relatively high compared to common home loans. Apart from that, borrowers can expect some additional costs like an appraisal fee.

Approval Criteria for Investment Loan

Many people do not have any idea about how does investment loans work. In fact, the approval criteria for this type of loan are quite complicated. Sometimes, banks or lenders ask to prove negative gearing benefits in order to prove that you can afford an investment loan.

You must be in a strong financial position to qualify for an investment loan. From the point of view of Australian banks, people who borrow more investment loans are considered high-value clients, even if such a loan is at the higher risk side of the bank. Some of the lending criteria for the approval of an investment loan are:

Sufficient deposit: A good deposit is essential to qualify for an investment loan. Around 20% deposit is essential to get a more than 80% of the property value. Some lenders prefer equities in other properties if you borrow more than 90%. Getting loan approval is difficult without a sufficient deposit.

Importance of genuine savings: A cash deposit saved or accumulated in your bank account for a minimum of three months is required to apply for an investment loan. It helps you to make lenders understand your capability to manage finance well.

A good credit history: A good credit score and a clean credit history are also necessary for a borrower to qualify for an investment loan.

Good employment and a strong income: Most people think of how to get an investment loan. Getting a loan is pretty easy for those who have a job and a good income. It shows their capacity to afford the mortgage. Professional investors without any job can qualify for the loan if they produce their bank statements and tax returns as proof of income.

How Much Can I Borrow Investment Loan

Every applicant should ask themselves how much can I borrow an investment loan before applying for approval. The borrowing power of an individual depends on the strength of the loan application. It also depends on the lender you apply with. Based on that you can borrow up to:
85% of investment loan: If you have stable employment and a good income, you might be eligible for nearly 85% of the investment loan. In this case, lenders might ask you to have around 5% genuine savings and a 15% deposit.

90% of the property value: A borrower can have 90% of the investment loan if they have a clean credit record, a good deposit, and an investment property easily marketable. In this situation, developing a strong case with the lender is necessary.

For more than 90%: Borrowers need a perfect history, a huge deposit, and an excellent investment portfolio to get more than 90% of the investment loan. In addition, they have an easily selling standard investment property. Very few lenders can offer you more than a 90% loan, and getting qualified for this loan can be difficult.

Learn how to get an investment loan before applying for one. A borrower needs to consider many things to qualify for getting approval for an investment loan. The loan rate is one of the. Compare best investment loan rates before approaching a lender for getting approval for a loan. A borrower can qualify for the loan amount based on the strength of their loan application. If you plan to invest in a property in Australia, find a suitable lender to get an investment loan.