Getting A Loan For Investment Property
Investing in real estate is generally considered a safe investment in the longer run. Unlike the equity and commodity markets that keep fluctuating on a daily basis, real estate provides returns greater than inflation and fluctuates at a far lower rate, unless in situations when an economic recession take hold. Property is not as liquid as other markets so does not fluctuate as much day to day and averages out a lot of the movements and trends.
Lenders and Banks
If you have the money to make such investments free hold (without a loan), it is not a serious matter of concern whether the prices or market conditions go up or down short term. However, if you intend to take a loan for the same investment (property), there are several issues to be kept in mind. While banks do not mind giving away investment loans, as investment loans are the safest loans when compared to other unsecured loans, banks also consider the amount of margin (loan amount to total value of property) money that you are ready to channel into an investment loan. Thanks to the subprime crisis, banks today do not fund one hundred percent of the investment. Hence, the higher the margin money (LVR) is, the harder the possibility of getting a loan would be.
Also, have multiple choices of property lenders while applying for a loan is the best idea, they all have different products. Merely having one lender in mind can be detrimental to your cause. Since you would know your salary and your preference of the monthly payments you would be able to pay, it would be easy to negotiate with the bank for a longer tenure or a shorter one. You would be paying a lot of money when you take a short tenure, which can be as high as 200-300 percent of the principal itself. Think long-terms to reduce payments and just make sure you can manage the short-term repayments (next weeks!!).
Have You Got Security?
Banks also find it easy to fund when you are able to provide collateral security in the form of another property or another co-applicant who can act as a guarantor for the loan for investment property, so keep this in mind if you hit a few hurdles and the lenders or banks are not making it easy.
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