Buying an investment property is different from buying a home to live in. Your borrowing capacity, expected rental income, existing debts, available equity and the way your loans are structured can all affect which lenders are suitable.
Working with a mortgage broker for investment property can make the process easier. A broker can compare lenders, assess your borrowing position and help structure your investment loan with both your current purchase and future plans in mind.
Whether you are buying your first rental property or growing an existing portfolio, getting the finance right can be just as important as choosing the property itself.
What Does a Mortgage Broker for Investment Property Do?
A mortgage broker for investment property helps investors understand and compare finance options available from different lenders.
Instead of approaching one bank and being limited to its products and lending policies, a broker can assess options from a wider panel of lenders.
A mortgage broker may help with:
- Assessing your borrowing capacity
- Comparing investment property loan options
- Understanding different lender policies
- Reviewing existing home and investment loans
- Assessing available equity
- Comparing principal and interest with interest-only options
- Refinancing existing loans
- Preparing and submitting your loan application
- Managing the application through to settlement
If you are already considering an investment purchase, learn more about investment property loans with LoanBrix.
1. Investment Property Lending Can Be More Complicated
Getting approved for an investment property loan involves more than simply looking at your salary and the property’s purchase price.
Depending on the lender, your application may be assessed using factors such as:
- Your employment or business income
- Existing mortgages
- Personal loans and credit cards
- Living expenses
- Rental income from existing properties
- Expected rental income from the new property
- Your deposit or available equity
- Your credit history
- The lender’s serviceability requirements
Different lenders can assess the same borrower differently. One lender may treat rental income, existing debts or certain types of income more favourably than another.
A mortgage broker for investment property can compare these lending policies and identify options that may better fit your circumstances.
2. A Mortgage Broker Can Compare Different Lenders
If you approach your current bank directly, you are generally only seeing the products and policies offered by that lender.
For an investor, the lowest advertised interest rate is not always the only consideration. You may also need to think about:
- Borrowing capacity
- Loan-to-value ratio requirements
- Offset accounts
- Interest-only options
- Loan fees
- Fixed versus variable rates
- Refinancing flexibility
- Your ability to borrow again in the future
The lender that suits your first investment property may not necessarily be the lender that suits your second or third.
You can explore LoanBrix’s residential investment property loan options for more information.
3. Your Borrowing Capacity Matters
Borrowing capacity is one of the most important considerations for property investors, particularly if you plan to own more than one investment property.
Every new mortgage can influence how much you may be able to borrow for the next purchase.
Lenders commonly assess your existing debts, income, living expenses and rental income when working out how much they may be prepared to lend.
A mortgage broker for investment property can compare your potential borrowing capacity with different lenders before you submit an application.
This can help answer questions such as:
- How much could I potentially borrow?
- How much deposit or equity might I need?
- Could my existing debts reduce my borrowing power?
- Would refinancing change my position?
- How could this investment loan affect my next purchase?
LoanBrix also provides answers to common lending questions in its home loan FAQs.
4. Loan Structure Matters for Property Investors
Investment property finance is not simply about getting an approval. How your loans are structured can also affect flexibility later.
For example, someone who already owns a home may consider using available equity to help fund an investment property deposit. Depending on the circumstances, this could involve refinancing, creating separate loan splits or establishing another lending facility.
Keeping investment and personal borrowing clearly structured can also be important for record keeping and taxation purposes.
Because tax outcomes depend on how borrowed money is actually used, investors should obtain independent tax advice before making decisions based on potential deductions.
The Australian Taxation Office’s residential rental property guidance provides further information.
5. A Mortgage Broker Can Help You Understand Your Equity
Many existing homeowners use equity to help fund another property purchase.
Equity is broadly the difference between your property’s value and the amount you still owe against it.
For example, if a property is worth $800,000 and the mortgage balance is $500,000, there is $300,000 in total equity. That does not automatically mean the full $300,000 is available to borrow.
The amount you may actually be able to access will depend on factors including the lender’s loan-to-value requirements, your borrowing capacity, income, expenses and the lender’s valuation of the property.
A mortgage broker for investment property can assess your existing lending and determine whether accessing equity may be an option for your next purchase.
If accessing equity requires changing your existing home loan, read more about refinancing with LoanBrix.
6. Interest Rates Aren’t the Only Thing to Compare
Getting a competitive interest rate is important, but investors should generally look at the complete loan rather than choosing finance based solely on the headline rate.
Other considerations can include:
- Application and ongoing fees
- Offset account availability
- Redraw facilities
- Fixed or variable interest rates
- Principal and interest repayments
- Interest-only repayment options
- Loan flexibility
The right combination depends on your financial position and what you intend to do with the property.
7. What About Interest-Only Investment Loans?
Interest-only loans are commonly discussed by property investors because repayments during the interest-only period cover interest rather than reducing the principal balance.
However, interest-only lending is not automatically the best option for every investor. Once the interest-only period finishes, repayments can increase because the remaining principal generally needs to be repaid over the remaining loan term.
ASIC’s MoneySmart guide to interest-only home loans explains how these loans work and some of the risks investors should consider.
A mortgage broker can compare principal and interest and interest-only lending options, while an accountant or tax adviser can provide advice about the tax consequences for your individual situation.
8. A Broker Can Review Your Existing Investment Loans
You do not need to be purchasing another property before speaking with a broker.
If you already own investment property, it may be worthwhile reviewing your loans periodically to see whether they still suit your circumstances.
A review could consider:
- Your current interest rate
- Loan fees
- Available equity
- Your existing loan structure
- Fixed-rate expiry dates
- Interest-only expiry dates
- Your borrowing capacity for another property
Refinancing is not always beneficial because switching loans can involve fees and other costs. A broker can help you compare the potential benefits against the costs before deciding whether to refinance.
9. A Mortgage Broker Can Save You Time
Comparing investment loans yourself can mean contacting multiple lenders, researching different lending criteria and repeatedly providing financial information.
A mortgage broker can handle much of the finance process for you.
After reviewing your circumstances, they can compare suitable lending options, help organise your documentation, submit the application and communicate with the lender as the application progresses.
LoanBrix outlines the broader purchase and loan process on its home loans page.
10. A Mortgage Broker Can Help You Think Beyond One Property
One of the biggest reasons to use a mortgage broker for investment property is that your finance strategy does not necessarily end when one property settles.
If your goal is to build an investment portfolio, decisions made today could influence the lending options available for your next purchase.
Before taking out an investment loan, it can therefore be useful to consider:
- How will this loan affect future borrowing capacity?
- Should I use savings or available equity?
- Should my investment loan be separate from my home loan?
- Would refinancing existing debt make sense?
- What happens if I want to purchase another property later?
A broker can help you look at the current transaction while also taking your broader borrowing objectives into account.
When Should You Speak to a Mortgage Broker?
Ideally, speak with a mortgage broker for investment property before you start making offers.
Understanding your potential borrowing position beforehand can help you establish a more realistic property budget and identify finance issues before you commit to a purchase.
You may also want to speak with a broker when:
- Buying your first investment property
- Adding another property to your portfolio
- Using equity from your home
- Refinancing an investment property loan
- Reviewing an existing investment portfolio
- Approaching the end of an interest-only period
- Considering your next investment purchase
For a broader overview of the risks, costs and considerations involved when buying an investment property, see the Australian Government’s MoneySmart investment property guide.
What Documents Might an Investment Property Mortgage Broker Need?
The documents required will depend on your circumstances and the lender, but you may be asked to provide:
- Identification
- Recent payslips or evidence of income
- Bank statements
- Existing mortgage statements
- Credit card and personal loan details
- Rental statements
- Lease agreements for existing properties
- Details of your assets and liabilities
Self-employed borrowers may need additional financial documents depending on the lender and type of application.
Do You Need a Mortgage Broker for an Investment Property?
You are not required to use a mortgage broker to purchase an investment property. You can approach a lender directly.
However, investment lending can become more complicated once existing mortgages, rental income, equity and future property purchases are involved.
A mortgage broker for investment property can help you compare lenders, understand your borrowing position and find a loan structure suited to your circumstances.
Mortgage Broker for Investment Property in Melbourne
If you are looking for a mortgage broker for investment property in Melbourne, LoanBrix can help you understand your lending options and compare investment property finance from its lender panel.
Whether you are purchasing your first investment, refinancing an existing property or looking at the next addition to your portfolio, the LoanBrix team can assess your circumstances and help manage the finance process.
You can also explore LoanBrix’s investment property loan services before getting started.
Speak With a Mortgage Broker for Investment Property
Buying an investment property can involve borrowing capacity, equity, rental income, lender policy and loan structure all at once.
Working with a mortgage broker for investment property can help you understand those factors, compare suitable lenders and organise finance for your purchase.
If you are planning your next investment property, contact LoanBrix to discuss your borrowing position and investment property loan options.
General information only: This information is general in nature and does not take into account your personal objectives, financial situation or needs. Consider obtaining independent financial, legal and tax advice where appropriate.
