Lenders and ‘Favourable Sales’

2011 September 27
by admin

When looking to a purchase property, everybody loves a bargain! Buying a home that is priced below market value is an attractive option for those who do not have a large deposit.

Instead of entering the real estate market, property is purchased through private sale. These ‘favourable sales’ usually involve parties that have previously known each other.

Favourable sales are quite rare and most people looking to buy have to enter the real estate market through the regular channels.
However, getting finance to fund the purchase of ‘below market value’ homes can be quite difficult. Banks view these purchases differently and may be reluctant to lend. But a ‘favourable sale’ shouldn’t mean that you can’t borrow. Some lenders can still help.

‘Favourable sale’: what do the banks mean?

A favourable sale is the name given by the banks to a property that is priced below market value. Often individuals encounter the opportunity to purchase such a property in one of two scenarios:

  • Children buying a property off their parents who agree to sell it for a cheaper price: some parents may do this to help their children get established through home ownership.
  • In lieu of a debt: some people are offered the chance to buy a property for a reduced priced, as consideration for money borrowed.
    Although you may be getting a great deal, the biggest issue is getting finance to buy the property. The banks do not view these sales as they do the sale of regular homes.

What do the banks think?

Most favourable sales are made between two parties with an established relationship. Accordingly, most people do not feel the need to involve a real estate agent, as this is generally seen as an unnecessary cost.

However, without a real estate agent, there is a higher chance that the valuation of the property could be altered and the bank may end up lending more than the property is worth. As a result, some banks may decline your loan outright. Although, there are some banks that will ensure the valuation is correct and then on that basis, approve your loan.

How much can I borrow?

Generally, most lenders will only allow you to borrow 80% of the property value. This is because of strict Lenders Mortgage Insurance policies. However, there are other lenders that may approve you for a much higher amount, especially where there are no issues with the valuation. Whilst almost all banks require that you provide 5% genuine savings, some may approve your loan even where you have no savings. It all depends on the circumstances of the sale and the strength of your finances.
Banks prefer borrowers that have a stable income and job, as they pose less risk of defaulting on the loan.

Are there any other extra costs?

It is important to remember other costs such as LMI and stamp duty. However, LMI will only apply where you are borrowing over 80% of the purchase price. There are some lenders that will waive the requirement for loans over 85%, but this will be assessed on a case by case basis. Stamp duty is assessed independently, but can be quite a large amount. It is important to bear this mind before committing yourself to a loan.

Getting approval

If you know someone who is offering their property to you for a price that is below market value, then it is best to speak to an expert mortgage broker who can help you apply for a loan. Their help will ensure that the process is as smooth as possible and that you get approval.

Mortgage for a Hotel Conversion

2011 September 27
by admin

Investing in a hotel conversion or a strata title hotel property is becoming quite common with many older hotels now being renovated and re-sold to accommodate for a growing population. Units and apartments are in high demand, especially in inner city areas that are close to shops, schools, universities and other amenities.
Whilst a hotel conversion sounds like a great investment, they generally require quite a big financial commitment. Further, it may be difficult to get a loan as some banks have restrictive lending policies for this property type. However, there are ways to get approval!

What is a hotel conversion?

A hotel conversion is used to describe the transformation of a former, often older hotel, into an apartment block, containing separate strata title units.
However, they differ from most regular units in that they may have shared kitchen and bathroom facilities on the one level. Once the units are renovated, they are put up for sale. Investors usually buy these apartments and rent them out.

Converted hotels can be popular with singles, couples, students or retired persons. As they are quite small in size, there is a limited market of buyers and renters. However, most converted hotels are in city areas and as such, they can be quite popular.

What is a strata title hotel property?

A strata title hotel is the name given to a hotel that comprises of rooms that have each been individually purchased by investors and are being rented by the hotel. Unlike converted hotels, the actual hotel still manages the unit.

This property type is treated by the banks as a regular investment and as the property is rented back to hotel, there is a guarantee of return. Most banks will approve a loan of up 80% of the purchase price and 70% for low doc borrowers.

How much can I borrow?

If you are looking to borrow money to finance a hotel conversion most banks will require a 15% deposit, thereby allowing you to borrow up to 85% LVR. However, where you cannot provide adequate documentation to prove your income, it is advisable that you go low doc.

This option is popular with self-employed individuals. If you get approved for a low doc loan, you may be able to borrow 80% LVR. Note that as with most low doc loans, interest rates may be higher.

What do the banks think?

Hotel conversions are an unusual property type and as such there is a higher risk involved in lending. Regular homes are more sellable and in higher demand and the banks can be certain that they will be able to recover any funds through re-sale. The shared facilities and small living spaces in converted hotel units are not desired by many buyers. Equally, the banks recognise that investors may have difficulty renting these apartments out. Accordingly, most banks will be reluctant to lend and many will decline your loan outright. But how can you make the banks see that you are a responsible borrower? Read on to find out how you can get your loan approved.

How can I get approval?

Investors with big portfolios and a stable income are usually favored by most major banks. However, borrowing for a hotel conversion or using a converted hotel unit as security for a loan can be difficult. This is why it is essential that you have a strong credit history and can demonstrate that you have the ability to repay the loan.
Getting in touch with an expert broker will increase your chances of getting approval. We can help formulate your application in the best possible light and ensure that you get a competitive loan package and great discounts. Speak to us today.

Financing a Home in a Flood Zone

2011 September 27
by admin

Is your property located in a flood zone? Despite living in a beautiful part of Australia, owning a property in those areas is often risky. Due to the erratic nature of the weather, your house could be damaged or destroyed during a severe storm or flood. Accordingly, most banks are reluctant to lend out of a concern that the property, which secures your loan, will not be livable or sellable if a flood were to occur. So how do you get finance in a flood zone? What do you need to provide the banks with? Read on to find out more.

What is a flood zone?

A flood zone or flood ‘overlay’ is an area that is at risk of flood due to location. The flood may occur as a result of rising sea levels in a coastal area, or in a very dry, arid area as a result of high rainfall and overflowing rivers and dams. Generally, the storm water system in place cannot accommodate for such a large amount of water and consequently, the area floods. If you live in a flood zone, the Bureau of Meteorology: http://www.bom.gov.au/ can help you keep up to date on the latest weather warnings.

Is my house at risk?

If your house is in an area that has been declared as a flood zone then it is likely that your property is at risk of flooding. Where the house you are buying is not on stilts, it may be more susceptible to damage. Therefore it is important to know your zone classification and get an insurance policy that covers this risk.

Can I get a loan?

It all depends on how your property is classified. If there is a chance that there could be a flood in your area every one hundred years, this is expressed as 1:100. Where flooding may occur more frequently in your area, it may be difficult to get finance even though you may have insurance. If there is a 1:50 year chance of flooding, the bank will assess your situation on a case-by-case basis. Where you have strong finances, you may get approval for a home loan.

How much will the banks lend?

All first home buyers and investors will have to provide 5% of the purchase price as a deposit. Where you do not have adequate documentation to qualify for a regular loan, you may have to go low doc. Borrowers of this kind can borrow 80% LVR.

You may also be eligible for competitive rates and other attractive discounts.

What do I need to provide?

Getting finance for a property in a flood zone can be exceedingly complicated. Your property is not like a regular property that is not susceptible to natural disasters. Because of this, there is more risk involved in lending to you.

When applying for a loan it is important to provide the banks with all the documentation relating to the flood zoning, and recent histories of flooding and a copy of your insurance policy. This information will help to comfort the banks and they will be more likely to approve your home loan.

Will I get approval?

Where you have a strong financial situation, stable employment and a good credit history, most lenders will give these factors considerable weight and may still approve you for a home loan. The key is to speak to the right mortgage broker who can formulate your application in the most favourable light to ensure that you get the mortgage you need to buy a home. Speak to us today.

Home Loans for a Duplex

2011 September 20
by admin

Dual-occupancy dwellings such as duplexes and granny flats are common with smaller families, couples and those with extended relatives. Although they are houses just like single dwellings, the lending policy for this property type differs from bank to bank. Read on to find out some important information before applying for a loan to purchase a duplex.

What is a duplex?

Just like other forms of dual-occupancy dwellings, a duplex is two properties on one block of land. Commonly, the properties are separate by a common wall and sometimes they can be two distinct dwellings.

These are to be distinguished from granny flats which are simply a smaller self-contained unit annexed to the back of a dwelling or detached.

Granny flats are more commonly used when large families have teenagers that need a private living space, older parents who need looking after or as a guest house for visitors.

However, duplexes are usually purchased by small families, couples, or singles that don’t need much living space, as duplexes by their very nature are smaller.

How do lenders view dual-occupancy dwellings?

Banks take a very traditional and strict approach to lending for those wishing to buy a duplex. Most lenders form the view that duplexes are not in high demand and that the more popular property type are single dwellings. Accordingly, in the event that they had to sell your property it would make it difficult to recoup their funds.

Because of this, in order to get approval for a loan it is essential that you have employment stability, good savings and a clear credit history.

Why do lenders take this view?

Generally any lending policy is based on experience. It could be that the banks have experienced difficulty in the past with those buying a duplex and borrowing funds. As such, they profile you and your application into a category of risk.

The fact that you are buying a dual-occupancy dwelling and not a more common single dwelling means that the banks automatically believe that there is a high risk in lending to you because of your property type.
However, there are some banks that will lend and still offer a great loan package.

How much can I borrow?

If you were to approach the major banks, you may only be entitled to borrow 80% LVR or 60% LVR if you are applying for a low doc loan. However, there are some lenders who will allow you to borrow more.

All lenders require a minimum 5% deposit when applying for a loan. If your parents are willing to become guarantee the loan using their property as security you may be able to borrow 100% of the purchase price.

  • If you are a first home buyer or investor, you can borrow up to 95% LVR.
  • If you are applying for a low doc loan you may be able to borrow up to 80% LVR.
  • Where you are undertaking a construction project it may be possible to borrow 95% of the total land and contract price.

Why buy a duplex?

If you don’t need a large living space a duplex is ideal. In many inner city and suburban areas duplexes are becoming quite common.

This is primarily due to an increased demand in housing across Australia. Accordingly, although the banks may view duplexes as an unpopular property type, there are still many people who are interested in buying a duplex.

What you need to know

It is important to approach the right lender when applying for a loan that will be used to purchase a duplex. This is because most lenders have strict policy and only a select few are lenient.

Where you have genuine savings and a good credit history, getting approval should be a breeze. If you think you meet this criteria then it may be time to start shopping around for that duplex!

Buying a Display Home: How To Get Finance

2011 September 20
by admin

Investing in a display home can have many benefits! Instead of having a regular tenant that may cause you stress or damage the property, the builder who constructed the house sells it to you and leases it back off you.

This neat little arrangement can provide big rental returns.
Alternatively, purchasing a former display home to live in can also be great.

They generally have all the added extras that regular homes do not have and have less wear and tear.

So have you ever considered buying one? Need a loan to fund the purchase? Read on to find out how you can get approval.

What is a display home?
Display homes are houses in display villages which are constructed for the sole purpose of providing people with an idea of what certain homes will look like when completed. This means that those wishing to buy land and build on the block can visit a few display villages and builders and see which homes they like before committing to the construction process.

Who buys display homes?

Once a display home is no longer being used for that purpose, it may be re-sold. However, this usually does not happen for 5 years.

This is why display homes are typically purchased by investors who buy the property and then lease it back to the builder. This way the builder has made money from the sale and has that money to use on other projects, but still has the property to showcase.

Can I borrow to buy a display home?

If you have found a great home in a display village you may be looking for finance to purchase the home. However, some banks take a different view of this property type, making it difficult to borrow.

Although, there are some lenders who will approve your loan, provided you have the minimum 5% deposit and are financially stable.

That way, the banks can be sure that you will repay the loan.

How much can I borrow?

The loan amount that you will qualify for depends on the state of your finances and whether you have all the required documentation.
For first home buyers, the standard lending criteria for existing dwellings would apply. Investors can borrow up to 90% LVR.

Approval Criteria for investors

Banks have very strict lending criteria when it comes to display homes. Generally, most lenders will not allow you to borrow unless the lease contract has been drawn up and organized and there is a certainty that there will be a tenant.

  • If you are wishing to borrow 75-80% LVR than the lease can be no longer than two years.
  • Some banks allow you to borrow 90% LVR but at a slightly higher interest rate.

However, it largely depends on the state of your finances. Depending on the circumstances of your case, the banks may more flexibly apply policy. This means you may still get a great loan package and low interest rates. It’s all about applying with the right lender!

Positives and negatives of buying a display home

If you an investor, buying a display home can offer solid returns without the hassle associated with renting to other tenants.

If you are a first home buyer who wants to live in a housing estate and has found a great display home that is now for sale, it may be in much better condition than comparative houses that were built at the same time.

For this reason, buying a display home can be better than buying another existing dwelling. It may also have top end fixtures and appliances that other regular homes would not have.

However, a display home is located in a display village and for this reason it may not be the most ideal place to live. Any purchase should be considered carefully.

As when making any big decision, it is important to weigh these factors up to decide whether you should invest or purchase to live in a display home.

Cross Collaterised Loans

2011 June 19

What is meant by “Cross Collateralised” Loans?

Cross collateralisation denotes the practice of combining multiple properties into one larger source of collateral for mortgages obtained from the same lender. The most common setting for cross collateralisation occurs when a bank requires additional security for an existing or proposed loan.

The following is an example of how a typical cross collateralised loan works:

Suppose you currently have an outstanding $400,000 home loan with your bank. The mortgage is secured by your $800,000 primary residence. You locate an attractive investment property for $500,000. The initial outlay required for acquisition is $530,000. Borrowing against your home equity is an option. This would, however, entail a considerable stamp duty and other costs. 

An alternative approach is a cross collateralised loan of $930,000. This would provide sufficient capital to acquire the investment property and retire your current home loan in full. Real estate values totalling $1,300,000 would secure a $930,000 loan. The loan-to-value (“LVR”) ratio of this loan proposal would be 71%. Any lender would find this figure very attractive.

By contrast, obtaining separate mortgages would yield the following results:

Loan 1: $530,000 

$400,000 existing home loan and $130,000 required for investment property deposit. 
As your $800,000 residence serves as the sole stand-alone collateral, the loan would have an LVR of 66%. From the lender’s perspective, this is even more attractive than the cross collateralized example cited above. It’s only part of the picture, however. 

Loan 2: $400,000 

This would be a new loan to finance the balance of the investment property’s purchase price.
As the investment real estate would be the sole standalone security for this loan, the LVR would be 80%. From a lender’s perspective, this is not nearly as attractive as the 66% of your separate refinance loan, or the 71% of a cross collateralised loan. Such an approach would likewise involve higher duty stamps and other costs, since two separate loans would be required. 

Should I always choose a cross collateralised loan over a stand-alone mortgage?

The best answer to this question is highly-dependent upon several specific borrower-related and loan-related factors. In general, our recommendation is to avoid cross collateralised loans. The two main reasons for this position are the extreme difficulty of subsequent collateral severance and loss of borrower control over loans. Taken together, these two features of cross collateralised loan structuring create high risks for prospective borrowers. 

By way of example, assume the following situation. You encumber 5 parcels of land with a cross collateralised loan. Subsequently, the need to sell one or more of the properties arises. As lien-holder of all the real estate, your lender may impose any of the following requirements:

1. Appraisal of the other 4 properties to ensure adequate residual security. 

If the value of your remaining collateral portfolio is not enough to fully secure the outstanding loan balance, the lender may demand sale of all 5 properties. Based upon the relative value deficiency level, the mortgagee may even prevent the proposed sale altogether. For obvious reasons, this can be quite problematic for you. If the property you wish to sell is your portfolio’s “anchor” by virtue of having a much higher relative value than the others, you are probably out of luck.

2. Full re-evaluation of your economic status to establish continued loan affordability. 

This can be very inconvenient for you. If, by the lender’s standards, your existing loan would be “unaffordable,” it can demand all proceeds from your proposed sale to reduce your total outstanding debt. If you are deemed to be in especially dire financial straits, the lender may demand immediate repayment of the whole outstanding balance – after retaining all proceeds from the prior sale. Such an eventuality would, of course, force liquidation of all properties within your collateral portfolio. In many cases, this includes the borrower’s primary residence. Refinancing via an alternative source may be impossible.

3. New documentation preparation. 

Most banks and other mortgage financiers require the issuance and endorsement of two sets of entirely new loan documents. This is to be expected, as the composition of security for your current cross collateralized loan will be changed. This may seem a trivial matter in comparison to other potential consequences. Nevertheless, it is a source of considerable hassle and entails some expense.

With stand-alone mortgages, you may sell a parcel of land whenever you desire. Your only obligation to the bank or other lender is repayment of just one loan. There is no reassessment of borrower financial status, and no formal valuation of any other property you own. The most important advantage to you is full control over the disbursement of any sales proceeds.

Aren’t a lot of small loans much more cumbersome? 

This concern is very common and valid. Consolidated debt with one lender certainly has many advantages over having multiple smaller balances outstanding with one or more lenders. A means of circumventing the major disadvantage of stand-alone loans is a revolving line of credit securitized by your most valuable realty holding. You may access it as needed for multiple investment purchase deposits.

Is a cross collateralised loan ever the best option?

There are instances in which cross collateralisation is the only practical loan structuring option. The most common instance is when none of your current realty holdings has enough equity to serve as security for a prospective investment purchase. The combined equities in two or more of your properties may be adequate to affect the purchase of a highly-desirable prospective investment acquisition. In such a case, you should definitely consider a cross collateralised loan, rather than miss out on potentially enormous investment gains.

What is meant by “all monies mortgages?”

“All monies” is used in the mortgage lending industry to denote a borrower’s entire outstanding debt with a particular lender. Many mortgages contain an “all monies” stipulation. Typically, such clauses allow your lender to accelerate all outstanding loans if you experience a material change of economic circumstances. Even your non-realty assets may be subject to forced liquidation. The only means of avoiding the attachment or involuntary sale of assets is to refinance your debt via a new loan or alternative lender.

Divide to minimize risk

For owners of multiple properties with several outstanding loans, we recommend the use of at least two primary lenders. If problems develop during the term of any loan(s), you already have a source of relatively easy refinancing installed. It is especially advisable to obtain a primary-residence home loan via one financing source, and all investment-related loans with another.

Learn more about cross collaterised loans.

Home Loan Advice

2011 June 3

For most people, buying a home is the most important investment they will ever make. Choosing the right home loan is one of the key elements in making the right investment in a family home or an investment property.

Among the items to take into account when considering a home loan are the loan type and the amount of money that you should borrow

What Loan Type Is Best For Me?

Choosing the right loan type will depend on your specific situation and budget. Generally you can choose either a fixed or variable interest rate loan. Sometimes it can be difficult to decide on which of these loans is best for your situation. In such cases, you should consider seeking home loan advice from professionals. Making the right loan choice can not only help save you money, but can also help you avoid the possibility of future default and even foreclosure.

Fixed Rate Loans

A fixed rate home loan involves a fixed interest rate and monthly repayment for a set period that usually lasts from one to 10 years. One of the drawbacks of fixed rate mortgages is that if you repay the loan in full before the fixed rate period ends, you will have to pay an early exit penalty known as “break cost” or “economic cost.” To avoid paying this penalty, you should make sure that you follow the repayment schedule.

Variable Rate Loans

Variable rate mortgage loans come in two types, the standard variable loan and the basic variable loan. The standard variable rate loan offers a varying interest rate that can increase or decrease during the repayment period. The professional package is often taken together with the standard variable loan, which is popular with investors who have more than one property. 

The basic variable rate mortgage is designed for borrowers who are looking for just a single home without any plans on buying additional property in the future. The interest rate can increase or decrease during the term of the loan, but the basic variable rate comes with a loan discount included. 

Equity And Line Of Credit Loans

You can use your equity or line of credit to obtain variable rate loans. Line of credit loans often do not require set repayments up until you reach your credit limit. Sometimes you make be required to make a monthly payment at least equal to the amount of accrued interest from the previous month.

Line of credit and equity loans are good for making renovations to your home and for other types of investments.

Combination Loans And Split Loans

One of the best options for a combination or split loan is to take the loan together with a professional package. The professional package is designed for investors that have multiple loans that can be of various types and it combines the rates together in a single annual package fee.

A split loan refers to a mortgage that is partly of variable interest rate and partly of fixed interest rate. The split loan, thus, offers some of the advantages of both the variable and fixed rate types of loans. You will not have to worry as much about interest rates going up with the fixed interest rate, and you can make extra payments with the variable interest rate.

Can Non-Citizens Obtain Home Loans?

Australia allows permanent residents and temporary residents to obtain mortgages and buy property in the country. 

Generally, banks will only cover about 80 percent of the property value for expatriates that are purchasing homes. However, those who have lived in Australia for more than 12 months and that are willing to pay a higher deposit can often find a bank that will cover up to 90 percent of the property value.

Permanent residents and expatriates who are married to Australian citizens or permanent residents can usually obtain mortgage loans for up to 95 percent of the home value. 

People on temporary visas that will not be staying in Australia for more than 12 months are required to obtain approval from the Foreign Investment Review Board (FIRB). Spouses of Australian citizens and most others on temporary visas who will be staying for more than 12 months will not need FIRB approval.

In addition, temporary residents are not eligible for first home owners grants or other government benefits. However, if you have a spouse or partner visa and you will be purchasing property with your spouse or partner as joint tenants, then you can qualify for the First Home Owners Grant (FHOG).

How Much Should I Borrow?

Banks will often give you quotes on how much you qualify to borrow for a home loan. Generally though, this maximum amount is more than what you should prudently consider for your mortgage loan. 

The maximum amount that you qualify for can be taken as the amount that you will be able to pay while maintaining a generally low standard of living given your income. A good rule is to only consider loans that do not require repayments of more than about 35 percent of your gross income. 

However, for borrowers who are frugal and who have lower tax rates, they can prudently consider repayments up to about 40 percent of their gross income. 

For example, if a person were to make $80,000 a year with a desire to maintain a generally higher living standard, then the annual repayment should be no more than $28,000 ($80,000 X 35%) or $2333 a month. In order to figure out what repayment rate is right for you, the best option may be to seek advice from a professional mortgage expert who can work through the details of your present and future budget.

Seeking Mortgage Advice For Investments

If you are a real estate investor, it is generally best to seek professional advice to optimize your chances for success.

Generally, it is best to seek standalone loan structuring rather than structures that depend on cross collateralisation. 

A cross collateralisation investment involves a secondary loan that is secured with your owner occupied family home. The obvious danger here is that you could lose your family home if you are unable to satisfy the terms of the secondary loan.

In a standalone structure, you first obtain a second loan using your line of credit on the family home. This second loan is used as a deposit for the investment property loan. In this way, the investment property is secured solely by the investment property itself and not by your family home.

Property Ownership For Couples

Husband and wife can benefit by allowing the highest income earner to hold title to the home for tax purposes. However, if you plan on owning the property for a long time, you can lower your future capital gains taxes by jointly owning the home.

Get more information on home loan types.

90% Home Loans

2011 May 30

Most of the lenders in Australia currently offer 90% home loans to at least some of their borrowers. Recently, there has been a return by lenders back toward offering high LVR (loan to value ratio) loans once again. A 90% home loan is still quite a bit more risky to lenders than the more traditional 80% loan, but it is considered a great deal safer than a loan with only a 5% deposit, or no deposit at all.

There are some lenders who will be willing to offer a 90% loan even without any genuine savings. Lenders have been loosening up somewhat as the economy has been improving steadily in recent times. Many financial experts anticipate that this option will start to become more common in the near future, and that they won’t be quite as difficult to get approved for. At the same time, if you have a relatively unreliable credit history, you most likely won’t be able to take advantage of this option. Rather than trying to find these loans on your own, it is often a good idea to take advantage of the services offered by a mortgage broker. They have a better idea of who is most likely to approve your loan, and who will do so without charging you an unfair interest rate.

Another option is to take advantage of something called a “cash out” loan. This is when you refinance your home in such a way that you can gain access to funds that you will be able to use for your own purposes. It is more difficult to get approved for this type of loan than it was in the past. There was once a time when you could cash out a loan with little more justification than to say you will use it as an investment. Today, you will need to provide more evidence to support your case.

Cash out on a 90% loan is not impossible, but you will need to offer a compelling case in order to receive approval. Essentially, the reason for the loan needs to have a rational explanation. The amount of money that you are asking for should be proportional to the reason you are asking for it. If you are asking for more than $30,000, you will usually need to provide some paperwork to support your argument as well.

If you are self-employed or work on commission, it could be significantly more difficult to obtain approval, especially for larger loan amounts.

As is fairly standard for the financial industry, there aren’t any rules written in stone that all banks must abide by. If you argument makes sense, you have a good credit history, and you have the evidence to support it, there is a good chance that you will be approved. It is truly up to the lender to make that decision.

A 90% loan can also be a good solution for an investor. It can be somewhat risky to purchase a property with a 5% deposit, or no deposit at all, but many investors are comfortable with less than a 20% deposit. It gives an investor more flexibility without putting them at too much risk. They have the opportunity to invest in almost twice as many properties. Often times, the cost of lender’s mortgage insurance for a 90% loan is quite a bit lower than at 95%.

There are various factors that will affect your ability to get approved for a 90% loan. One of the most important factors is the purpose of the loan itself. Will you be using it to buy a home for your own purposes, to invest in property, or to refinance? Some banks will consider one type of loan to be more risky than another. Generally, you will have more luck if you are applying for a loan to use for your own purposes. Investors are often more willing to take risks, which can lead to some discomfort on behalf of the bank. Refinancing could also be an indication that the borrower is experiencing some financial trouble, especially if they are self-employed.

Obviously, your credit history will have an impact on whether or not you are approved. Other debts that you owe will also play a big part. The bank will weigh these debts against your income in order to determine whether or not they feel you will be able to make your monthly payments on time, since this is the bank’s ultimate concern. They will usually hope to see that you have been working at the same job for more than six months, and it is often beneficial to see that you have been in the same industry for more than two years. Seeing five percent genuine savings is also very helpful for your case. The savings should be in the bank for between 3 and 6 months in most cases.

Learn more about 90% home loans.