investment loan

Mortgage Investment Loans Toronto NSW

We understand investment loans

Investing in Real Estate has been a popular strategy for accumulating wealth and preparing for retirement. That being said, only 1 in 5 Australians own an investment property based on the Australian Bureau of Statistics' (ABS) survey of income and housing. Around 20% of Investment property owners are in the $80,000-$90,000 income bracket which shows that you don't have to be one of the super wealthy to start your investment journey. 

No matter what type of property investor you are, or strive to be, it’s important to remember that property investment is available to everyone in all walks of life. The data already shows us that you don’t have to be among Australia’s richest to be within a chance of creating your own property portfolio - although it would make it easier and more likely. Most importantly, you need start by having a plan and a time tested proven strategy. 

In most cases, it's beneficial to purchase an owner occupied property first to cash in on all the government incentives available to first home buyers, and then look at investing in a rental property once you've paid your loan down to around 60% of the value of the home. The remaining 40% is what we call equity, and this can be used to secure another property with proposed rental income being added to the serviceability calculator. It's important to note that even if you will be receiving enough rental income to cover the loan repayments, this doesn't guarantee you will be approved as the banks will also apply expenses and a higher assessment rate to your scenario.

Before you make any decision's, make an appointment with Grace Loans so that we can calculate your borrowing capacity and ensure you'll be able to achieve approval for your investment loan. 

Investment Loans FAQs

  • How much can I borrow?

    The number one most asked question, with an answer that’s different for each person. Because it's all depending on what your income is and the value of the property(ies) that you have to use as a security for the loan. (See the answers for "Serviceability" and "LVR" below)

  • What is a "LVR"?

    LVR stands for "Loan to Value Ratio." It’s calculated by dividing the loan amount by the value of the securities involved. Lenders limit the amount you can borrow according to this LVR rule. Generally, most people can borrow up to 80% LVR (that’s 80% of the value of the property) without penalty. In some cases, by paying for "Lenders Mortgage Insurance" (See "LMI" below) up to 95% can be borrowed, or even 97% where the cost of the LMI becomes included within the loan amount ("capitalised LMI").

  • What is "serviceability"?

    Your ability to generate enough income to cover loan payments is described as "serviceability." Each bank has its own way of calculating how much income you need. The interest rate will be higher than present rates in the calculation to allow for rates going up in the future causing undue stress on your financial situation. Credit cards and loans not being refinanced will have payment amounts increased to cover the amount owing as if the facility was fully drawn. That means that if you have a credit card with a very large credit limit it will be harder to qualify for a loan.

    Part of the equation that most people ignore is what they spend their money on. With your broker being required to make reasonable enquiries into your spending, including examining bank accounts, to verify your estimates of your living expenses. While the banks will have minimums for each family situation, they want it to be adjusted upwards to match your particular situation. Where you have obligations such as insurances, pay TV and club memberships, those amounts will all need to be added on top of their minimums or your other normal living expenses.

  • What is "LMI"?

    "LMI" is "Lenders Mortgage Insurance." This insurance doesn't protect you, it protects the lender. Many lenders will ensure all of their loans, only passing this cost to you when you’re over 80% LVR (see LVR question above). A few lenders will go up to 85% LVR without charging you for LMI, and several of the major banks will allow up to 90% LVR for certain medical professionals.

    LMI costs vary according to the LVR and amount borrowed. With slight variations from one lender to another. It's not unusual for a borrower to be charged something on the order of $10,000. Part of your mortgage broker's preliminary assessment will be to provide an estimate of what the LMI charge will be for the recommended lender. Your broker should also be able to show you how the LMI varies from lender to lender in your particular situation.

  • Is loan interest tax deductible?

    Generally, the interest you pay on your investment loan will be tax deductible providing the loan was used to purchase the investment property and related costs. For the maximum tax benefit, you might consider using an offset account on your next investment loan, as all the income from the property can be paid into the offset and all the expenses relating to the property can also be taken from that account, keeping everything together for your accountant and avoiding any debt corruption (such as redrawing on your investment loan for a personal purpose).

  • What documentation do I need to provide to apply for a loan?

    It varies slightly from bank to bank, but for PAYG income earners this would be typical:

    • Your last two payslips
    • Your last Notice of Assessment (Find it at MyGov - ATO) or Group Certificate (from your employe)
    • ID verification with Drivers Licence & Passport or Birth Certificate + proof of change of name, if applicabe
    • The last six months of statements for all transaction accounts and credit cards
    • Rates statements for any existing properties being used as security
    • A rental appraisal by a real estate agent concerning the property you intend to purchase

    For self-employed borrowers, generally you’ll need to have your ABN for two years, and most lenders want two years of financial reports, tax returns and Notices of Assessment too.

Call us today on 02 4905 0250 and get yourself booked in for a loan consultation where we will analyse your options and calculate your borrowing power.

Grace Loans and Bethany Massey are Authorised Credit Representatives of BLSSA Pty Ltd, Australian Credit Licence number 391237. Authorised Credit Representative nos. GL: 523940, Bethany: 513202. Content of site may not be fully up to date as lenders are constantly changing their loans and policies. Any advice provided on this website is of a general nature not taking into account your personal objectives and situation. Such matters are important to consider prior to taking any action. Please make an appointment to discuss your specific situation so that appropriate advice may be given with regard to suitable products using current information.