How to overcome tough investor rules


How to overcome tough investor rules

Tighter restrictions on lenders has made it harder for Aussie investors seeking to expand their portfolio.

According to news.com.au, this is because of stricter income tests and harsher rules for interest-only loans.

Here’s what you need to know.

Investors in Australia

Data from the Australian Taxation Office says a third of Australia’s 2.1 million residential investors, owns more than one piece of property.

And, it’s possible that many of these investors see their property portfolio as a solution to funding retirement, especially given the weak share market.

Despite this, growing an investment property portfolio has become more difficult thanks to changes to tax laws, stricter rent and repayment assessments and income tests.

Other factors impacting investor success include:

  • Interest rates for investors are now between 7.25 and 8%, compared with 4% for residential loans.
  • Only 70% of the rental income of a property is counted by lenders.
  • Interest only loans, which are historically popular with investors, have become more difficult to attain.
  • Interest only loans are also more difficult to pay off, since repayments increase once the interest has been paid, and the borrower swaps to paying the principal-and-interest off. (Head here for more.)
  • Lenders are now paying more attention to investors who want interest-only loans, to make sure they can afford to pay the principal-and-interest amount, when the interest-only period is over.

What’s the solution for investors?

Investors in today’s lending environment need to be more savvy about choosing a lender that aligns with their goals.

Yes, investor lending has become stricter, but this doesn’t mean it’s impossible to secure a loan that is right for you, and your investment objectives.

You just need to know where to look.

Having a comprehensive list of lenders and loan products will make it easier to find a loan that allows you to expand your investment portfolio further. 

We recommend speaking with a good mortgage broker, with experience in the investment lending sector, who can search for a loan that works for you.

A good investment broker should take the time to understand your goals, and they’ll determine a budget that won’t cause you undue stress.

They can then run regular checks on your mortgages (if you have more than one), and ensure you’re still paying off the most suitable loan.

Often, cheaper loans, with lower interest rates and ongoing fees, do become available. So, it’s important to check the market, at least every 12 months. 

Refinancing is a surprisingly simple procedure, which can be handled by your mortgage broker. 

If you’re looking for an investment loan, or would like your existing investment loans reviewed, contact us today.

 

Financial Advice Disclaimer: This information is general in nature. Mortgage brokers do not provide financial advice. Clients seeking financial advice will be referred to a qualified financial planner.
 
* All data stated above sourced from THIS NEWS.COM.AU ARTICLE.

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