Tag Archives: mortgage broker

How to Finance Your Property Investments

Financing Property Investments Now


Is your primary goal to add value to property through renovation or development? Why focus on one or two key strategies and specialise? We’ve seen many people try so many different strategies, never really giving any of them the focus required to get results.

Finance property investments for most residential real estate investments…it means you could be in a position to borrow and buy an investment property with a typical deposit (or surplus equity in another property) of 20% of purchase price.

While you can borrow more than 80% loan to value ratio (LVR) with some lenders, you need to factor in higher interest rates, lenders mortgage insurance and higher risks of larger mortgage payments.

Finance or be it raising funds or cash required for a deposit, plus allowing for closing and holding costs on an investment property is probably one of the biggest stumbling blocks, even if you get a 90%+ LVR loan…

Finance property investments is all about knowing how the numbers stack up, taking action and knowing what action to take:

  • Stamp duty
  • Settlement costs
  • Conveyancing costs
  • Bank fees
  • Title transfer fees
  • Other miscellaneous costs
  • Holding costs until rental income begins
  • Others sources of finance

Equity is the difference between your property’s market value and outstanding balance of all loans on property. Recycling equity is  the process where investors leverage/borrow against equity in each existing property they own to help to fund the next deal…

finance property investments
How to Finance Your Property Investments and Maximise Your Returns from Property Investments…

Finance property investments using money gifted, borrowed or pledged from family members as guarantors as a source of finance or your deposit for your next real estate investment.

Superannuation funds (SMSFs) can purchase real estate for investment. Legislation changes made in 2008 mitigated the risk to an individual’s investment portfolio by making property investment possible.

Mortgage brokers and non-bank lenders can either belong exclusively to a particular financial institution or work for a mortgage lending company which can apply for loans on behalf of their clients across various financiers.

Vendor finance – where the seller (also known as the vendor), instead of demanding 100% of the sale proceeds at settlement, accepts terms that allow the borrower to pay an initial amount at settlement e.g. 80% and then repay the balance of the property’s sale price over a fixed term e.g. 20% over 2 years at an agreed interest rate.

Types of finance property investment loans available consist of interest only whereby the borrower only pays the cost of annual interest on the loan each year and does not have to repay the principal until a later date.

Principal and interest loans whereby you’re paying a principal and interest loan means you’re paying the current monthly interest due and progressively reducing the outstanding balance on mortgage and making principal repayments, so you’re progressively paying off the mortgage.

Revolving line of credit enables you to use generally up to 80% of your equity as collateral for further credit to make future purchases. It is an option chosen by real estate investors wanting the flexibility to top-up their mortgage to pre-agreed level without having to take out a separate mortgage each time…

Non-recourse financing means the borrower, in the event of failing to fulfill the terms of loan, has their liability limited to property which the mortgage is secured against only and does not offer other asset security or personal guarantees.

Full doc loans requires the documentation of all income, assets and liabilities and is the most common type of mortgage loan used

Lo doc loans need less for stringent income information than full doc loans, but still rely on a good deal of documentation to get approved.

Low start loans offers borrowers low establishment costs, a very low variable rate for the first 6 to 12 months and no monthly fees.

Refinancing  is the process of re-financing, topping up or consolidating existing and/or new debt with the same or new lender/s. Always check the full cost of doing this and especially break fees on existing mortgages.

Deposit bonds are alternatives to a cash deposit for borrowers who have existing equity in property and want to use bond/guarantee rather than a cash deposit.

This is common when buying off the plan with a 12-24 month settlement as it avoids paying a (borrowed) cash deposit and then paying the interest on the money while it sits in trust awaiting project completion and settlement…

Finance property investments and financial competence as this proves several points:

Please never overlook the discipline of a very good understanding of banking, finance, accounting, tax and importance of cash flow management, financial due diligence, budgeting, tracking and reporting because it’s often easier to get lots of money than a little.

Frequently going after small investors is the most troubling of all and it’s better to aim at people which are more substantial.

The magic word (no) is frequently the best way to make somebody want to get involved with you even more.

Knowing your numbers and business is what makes people want to move forward. Money always follows expertise and when you demonstrate you’re an expert with tactical skills in specific areas, money flows in a big way.

And sometimes so much money flows…you just have to say no.

The loan approval process using conditional and formal approval letters:

If a loan application meets certain broad guidelines at the initial assessment stage, a lender or finance broker may approve the application in principle or indicate pre-approval.

As the application progresses, information provided by the potential borrower such as identification details, salary and overall financial situation is subsequently confirmed and credit check reports are received. The lender or broker will form an opinion of the applicant’s ability to service a loan and a conditional approval letter will be issued if lending criteria are satisfied.

Approvals confirmation – Once all the necessary paperwork has been completed, it’s normally only a short time before approval.

Make sure you read and understand everything before signing up. Keep your conveyancer or solicitor in the loop. Ask questions if there is any confusion – taking on a housing loan is the largest financial decision most people will make.

The bank valuation is a basic part of a property loan approval, which is confirmation by the lender that the valuation of a property being offered as security is sufficient to cover the loan.

Lenders instruct a bank panel valuer to perform a market valuation and analyse what percentage of the purchase price is being financed with risk profile of the loan taking into consideration other factors such as location and average time to sell property…

Finance Property Investments

Property Investment Loans?

What You Need to Know About Investment Loans?


Investing in property? There are a range of residential investment loans to meet the varying needs of property investors. In fact, property investment loans are not too different from any other type of home loan.

Property Investment Loans for when deciding on the right investment loan most people only consider the interest rate.

Property investment loans include many other considerations like (hidden) fees you pay which can include:

  • Application/establishment fees, range from $0 to $1,000 and more depending on lender and the type of loan you need
  • Ongoing fees can range between nil to $550 per annum
  • Early exit fees/penalties from $0 to thousands
  • Fixed rate loan and economic costs
  • Discharge fees in order to get your title back you need to discharge any mortgage held over it, lenders charge differing fees
  • Mortgage insurance fee depending on lender/insurer, which is calculated using a percentage of loan amount (LVR)
  • Additional lending costs, charged to access any additional funds you have paid on your loan (redraw)
  • Fees charged for changing the security over loan and switching loan products also vary between lenders
  • Valuation costs and legal fees should also be considered…

Property Investment Loans, it’s important to tailor the correct product to suit your investment needs.

property investment loans
Property investment loans


Property investment loans example…let’s say you want to maximise the most suitable finance structure by using the best tax structure discussing the options with your tax professional.

Property Investment Loan Types: Property investment loans are no different to home loans. Interest rates, fees and lending policy are very similar:

  • Variable rates
  • Fixed rate loans
  • Line of credit
  • Construction loan
  • Low doc loan

All these types of loans are available for investment property loans.

It does not really matter what type of loan you choose just as long it fits your investment strategy using an interest rate which is competitive and fees (as discussed above) are not excessive.

Property investment loans considerations: professional packaged loans that allow you to put multiple loans under the one package which can help to save on establishment costs and ongoing fees.

Line of credit loans can be used to access equity from an existing home, used as a deposit or to purchase an investment property. If you already own a property, a line of credit is a good way for you to tap into any equity you’ve built up in property which can be used as a deposit for buying investment property.

A line of credit loan allows you to draw from a fixed amount at any time to pay for whatever you want. It’s kind of like a credit card with a big limit but the equity in your home acts as security for the loan.

Interest only loans and principal and interest facilities may be better utilized depending on your personal circumstances and investing objectives. Interest only loan the principal remains the same.

You only pay the original amount you borrowed when you finally sell investment property as this type of loan is useful for investors because your monthly repayments are less than they would be if you were paying off principal as well.

Fixed or variable rate loans also depend on borrowers risk profile and property investment strategy.

Long term property investors with a long term views prefer fixed rates so they know exactly what their repayments are.

Interest Only or Principle and Interest: Interest only loans allow you to only repay interest on the loan without reducing the principle loan amount.

This can assist in allowing a borrower to reduce non-deductible debt or bad debt more quickly. Principal and interest repayments allow debt to be reduced and more equity to be established.

Most property investors prefer interest only loans for the following reasons:

  • Investment interest repayments are tax deductible
  • Principle payments are not tax deductible
  • Principle payments are better utilised via personal non tax deductible debt which reduces amount paid each month freeing up cash flow…

Property investment loans like other loans means you can choose fixed, variable or split interest rates with flexible features like redraws, etc…

Property Investment Loans


Crucial Questions to Ask Your Mortgage Broker

Home Loans, Property Investment Loans and Refinancing


A mortgage broker or finance broker negotiates with banks, credit unions and other credit providers on your behalf to arrange loans. A mortgage broker typically specialises in home loans, helping to select a loan, manage the whole process right through to settlement.

Mortgage broker for your individual circumstances, as they change it’s important to review your home loan to ensure it meets your needs. In context to home loans changing from time to time, its worthwhile to review what’s available and maybe changing lenders.

How to refinance your home loan?  The refinance process begins with a face-to-face interview to better understand your investment needs and objectives with a complete review of all existing loans in the market place to identify products which best suits your goals.

When a lender is chosen, application form is completed and supporting documentation is submitted to lender, next step is for approval to be granted as contracts are prepared and issued to you for signing.

mortgage broker
Mortgage broker for your individual circumstances, as they change it’s important to review your home loan to ensure it meets your needs. In context to home loans changing from time to time, its worthwhile to review what’s available and maybe changing lenders.

What happens at settlement? Lender pays out existing loan(s) based on your instructions…

Why do some investors choose to refinance?

Most people refinance for one of the following reasons:

  • Home renovation
  • Better rate than your existing loan provides
  • Need cash for investment property
  • Save money by offsetting interest earned on money available against interest charged on loan
  • Switch from a fixed rate to variable rate or vice versa
  • Consolidate debts into a home loan at a cheaper rate to make repayments more affordable

When deciding which mortgage broker to use there are a few questions you want to ask. Is mortgage broker a member of the MFAA?

(MFAA) Mortgage and Finance Association of Australia is the national body which represents Professional Credit Advisers, mortgage, finance brokers, mortgage managers and aggregators.

Membership requirements of MFAA, accredited mortgage consultant (AMC) has achieved certification with experience level and all members are obliged to comply with a strict code of practice. MFAA members must be part of an external dispute resolution service.

How many lenders does a mortgage broker represent on their panel? It is important a mortgage broker has a wide variety of lenders on their panel:

  • Banks
  • Credit Unions
  • Mortgage Managers
  • Non-conforming lenders

Some mortgage brokers represent twenty or thirty different lenders, which means you get a wider choice instead of only a few.

How does the mortgage broker get paid? Brokers are paid a commission on loans which they refer to lenders. Some lenders pay higher level of commissions than others so it’s important to understand how much your mortgage broker is paid.

Mortgage brokers are required to provide a quote and a credit proposal document detailing the amount they are paid as a percentage and as a dollar figure. Professional mortgage brokers are objective and offer a comparison of at least three to five different lenders.

Do mortgage brokers charge a fee? Most mortgage brokers don’t charge a fee as they are paid by lenders to introduce loan as described above, however recent regulation of credit industry means mortgage brokers charge a fee for service as financial planners do.

mortgage brokers
Mortgage brokers, not all charge upfront fees…


This involves an upfront fee, which varies from broker to broker, although some brokers do not charge an upfront fee.

How are loans and lenders compared? Under MFAA code of conduct and National Consumer Credit Protection Act, a mortgage broker must only recommend loans, which are “not unsuitable” to the client.

Mortgage brokers typically do an interview to determine needs of the borrower, then use software packages to compare and eliminate unsuitable loans. The broker details differences between shortlisted loans to allow borrower to select preferred product and provider.

Loans are generally compared using a comparison rate as this rate takes into account cost of fees and charges associated with each lender’s product, allowing consumers to quickly and easily compare…apples to apples.

What insurance does the mortgage broker use? MFAA membership requires accredited mortgage consultant professional indemnity insurance. This means in the event a client needs to take legal action, they’re insured.

How is your personal and credit information protected? You need to make sure your mortgage broker understands the importance of maintaining your privacy and ensures your information is held under lock and key.

All reasonable actions must be taken to protect your personal information. These are core to principals of the Privacy Act. Mortgage brokers must abide by Trade Practices Act, ASIC Act, Fair Trading Act and NCCP.

Mortgage Broker