Taking out your first loan on your primary place of residence is an entirely different prospect to the strategy and cash flow requirements when signing up for your first investment property.
Even if your investment is nestled in a high-performing location and your yield is seeing you pocket a healthy return, it’s important to check in on your loan – as it could be costing you more than what you need to be spending.
According to mortgage broker at Smartline Personal Mortgage Advisers, Samantha Cranny, it’s imperative that you have your financial records in check when initially applying for finance.
She also explains that lenders treat owner-occupied and investment loans differently, so investors need to be aware of how the interest rate will be affected.
This can involve lenders “loading the rate”, which refers to them increasing the rate, Cranny shares as she sits down with Yourmortgage.com.au editor Sarah Megginson to help borrowers understand how they can save money on their investment loan.
“Years ago, the rate was the rate whether it was owner-occupied or investment, but now it’s a completely different ball game,” she says.
“If it is an investment, now they load the rates and if it’s interest only, they again load the rate and they also load your ability to service the loan.”
Furthermore, the loan term of investment loans compared to that of owner-occupied loans may be shorter, which Cranny adds “really does impact investors who are trying to borrow”.
In addition to ensuring that you keep clear records on exactly what your expenses and fees are in holding your asset, Cranny says it’s important to “have a good broker that’s actually going to be shopping around to get you the best rate”.
When it comes to securing a competitive loan, the mortgage broker advises borrowers to be aware of the service that the lender is going to provide; partly indicated by how long it takes them to respond to your loan application and whether they take on interest rate reductions for their customers.
“Lenders all have different specials on at different times,” Cranny shares. “That’s the other beauty of going with a broker – we get to see all of those things.”
To find out more about the nature of investment loans, what to be aware of before signing into one, and what can potentially hold you back from obtaining approval, watch Samantha Cranny’s full interview above.