With credit tightening for property investors for well over a year now, making a strong case in your loan applications has never been more important. To make a strong case in your loan application, there are a few things you can do. Here’s our list of what you can do to make the strongest case possible and increase your chances of loan approval for your opportunity to invest in a Central Coast property.
Do your research and shop around
Make sure you research rates through traditional banking channels and mortgage brokers to find the best rate possible for your financial situation. The Central Coast boasts a variety of lenders from the “Big 4” to Community banks.
Remember securing a loan isn’t always about the interest rate. With credit tightening for property investors, your Loan to Value Ratio (LVR) will be crucial in determining your interest rate. To calculate your interest rate, the lender will divide the amount of the loan you require by the value of the property.
Naturally, the greater the LVR, the higher the risk you represent to lenders. This will change the array of loan products available to you.
Pay down personal debt
To improve your credit rating and overall financial position, paying down personal debt should be your first priority. For property investors needing finance, this is particularly important. This is because paying down personal debt frees up your income which puts you in a stronger position to service your property finance.
Decrease and closely monitor discretionary spending It has been widely covered that lenders are now looking at applicants’ discretionary spending habits as part of the loan application process.
For at least a few months before you submit a loan application, aim to decrease your discretionary spending on things such as restaurant meals, Uber Eats, clothing, consumer products, and other discretionary lifestyle expenses.
Obviously, you don’t want to sacrifice enjoying yourself in this process, particularly if you chose to live on the Central Coast for a lifestyle decision, so if you can’t go without your weekly Uber Eats night, you could also demonstrate that you budget for lifestyle expenses by setting a specific amount aside each month and not going over it.
Refinance a current loan
If you’ve had a Principal Place of Residence loan for at least 5 years, you may be able to refinance your current balance over a new 30-year period. This will reduce your repayments, freeing up more of your income to service a loan on a new Central Coast investment property.
While it can be discouraging to get knocked back for a loan, remember it’s not an uncommon occurrence in the current credit market. Being proactive about strengthening your financial position, budgeting and putting yourself in the shoes of lenders and brokers will help you make sure you present yourself as a desirable loan applicant. Speak to your HSPM property management consultant to gain a full understanding the ongoing maintenance costs of an investment property and be confident in knowing what you need when you approach potential lenders.