There are different criteria for different investment loans, so this will be unique for your personal circumstances. Each company varies on what you need in order to qualify for an investment loan, but there are some general things to consider.
For example, you should think about what your credit score is like, and what your financial position is. (If you have a pretty strong financial background – with no debts – then you’re a lot more likely to be a candidate for an investment loan).
You should also have some money in your savings; money that you haven’t borrowed from elsewhere, around 5-10% of the total of the investment loan that you are applying for, and you should have some means of paying off the loan or alternative properties.
When it comes to getting the best investment loan, the banks that you look into should be those that understand your unique situation and your financial position. If the banks believe that it’s too much of a risk, then they are unlikely to offer you an investment loan, so look around.
Property investment loans are usually granted for specific types of property, predominantly existing houses as well as low or medium density units. You can also get investment loans for land that you plan to construct a property on, but there are some types of properties that the banks will not lend for, so be cautious here.
Before you dive in and get an investment loan, you should make sure that you’re in a good financial position and can make the repayments. Ideally, you’ll have a high income, and you’ll be investing into something that you know you’re going to get a good return on. Those with weaker financial backgrounds, and a property that does not produce a good return, can pull you into debt.
The highest percentage that you’re likely to get for your investment loan is 95%, although this does depend on your circumstances (if you have a good guarantor, for example). Most banks will offer 90% property investment loans because this presents the most common amount however this depends on your current financial situation.
The good thing about purchasing property with an investment loan is that you rarely lose out on the source of income without you having to lift (much of) a finger. There are also tax benefits for some when it comes to investment properties. The important thing to remember is that property rarely loses value.
No matter what type of property you’re going for with your investment loan, you need to factor the costs when you’re planning out your budget. For example, stamp duty can be a massive amount of cash that you have to pay out, which is not included in the valuations.
If you’re putting the property on the rental market, think about the ongoing costs and maintenance and factor them in.
An investment loan is a big financial decision to make, and if you’ve got a good credit score and in a good financial position, then this is something that you should consider thoroughly before you take the plunge!
