Top Tips for obtaining housing finance
Newcastle mortgage broker, David Hoar shares his passion for property by giving us his top tips for obtaining housing finance
The best strategy for getting into the market now depends upon your particular circumstances, and your ultimate objective(s), but remember that in December 2018 around 40% of all home loan applications were rejected – so before you get too excited talk to your broker or bank about getting pre-approved to save yourself unnecessary cost, time and stress.
If you’ve been fortunate enough to own property that has gone up in value over the last 5 or so year’s then you can look at using equity in your current property to buy another one. In this situation the bank re-values your property, to identify the equity you have available, and will generally allow you to borrow up to 80% of your current properties value.
Most lenders will structure the deal as follows:
- 20% of the new property value plus costs (stamp duty, pest and build, conveyancing etc) secured against your current property
- 80% of the new property value secured against your new property
By doing it this way you avoid Lenders Mortgage Insurance (LMI), which is normally charged by lenders if your loan on the new property is more than 80% of its value.
Buying on low or no deposit
There are some lenders that will allow you to borrow up to 95% (including LMI) to buy an investment property, however this can be expensive as LMI ramps up quite considerably when your loan/value ratio is over 90%.
If your parents or siblings own a property, then some lenders will allow you to use equity from their property to help support your purchase and avoid LMI.
Like where you live but can’t afford to buy there?
Then rentvesting might be a good strategy for you. In this case you continue to rent and then buy an investment property somewhere else.
Many people choose to do this – as they enjoy the lifestyle or proximity to work and social and entertainment options of where they live – but can’t afford to buy there.
So rather than miss good buying opportunities an investment is purchased in another location. Remember, that you don’t have to like where you buy an investment property, you just need a good supply of tenants that do!
About David Hoar
David Hoar of Home Loans Newcastle is a finance lending expert with clients from Brisbane to Hobart. David is a qualified Accountant, has a Graduate Diploma in Taxation, a Graduate Diploma in Marketing and Management, and a Certificate IV in Mortgage Broking – and he is passionate about ensuring property buyers have access to expert information and help.
For more information, visit: https://www.homeloansnewcastle.com.au/