Investment Property Loan Application Tips

25 October 2021

First Home Buyers Cashing In

If you’re looking at an investment property to capitalise on Australia’s booming property market, getting your finance approved is crucial.

Here are our top 5 tips to help you get your investment property loan application approved.

Tip 1: Discount your potential rental income

Most lenders will only factor in about 70 to 80% of your rental income from tenants as being available for loan repayments. That’s because there may be times when your investment property is vacant.

You need to demonstrate that you can afford your loan repayments at a 70 to 80% rental income level.

Tip 2: Consider all your ongoing investment property costs

Even though most investment property expenses are tax-deductible against your tenant income, you still need the cash flow to pay them when they occur. Common investment property expenses include:

  • council rates
  • insurance
  • property manager fees
  • body corporate fees (if you buy an apartment or townhouse)
  • repairs and maintenance.

You need to demonstrate that you will have the cash flow to make your loan repayments after allowing for all of your expenses.

Tip 3: Reduce your debt level as much as possible before you apply

Lenders will consider all the debt you have when assessing your investment property loan application. That includes things like personal loans, credit card limits and HECS debt. The more debt you have, the more of your income that will be taken up by repayments.

Different lenders will have different debt to income ratios that they will be prepared to accept. Try and reduce your debt level as much as you can before you apply for your loan.

Tip 4: Check your credit score before you apply

Lenders will check your credit score as part of assessing your investment property loan application. If you have a good credit score, you will have a better chance of being approved.

You can check your credit score for free online.

If you need to improve it before apply, there are a number of ways to do it, including:

  • clearing up any overdue payments you have.
  • making all your current repayments on time.
  • reducing the number of credit cards you have. Lenders will consider any credit limits you have as debt when assessing your loan application.

Tip 5: Check your borrowing power before you apply

Your borrowing power will depend on how much you can afford for your investment property loan repayments. This in turn will depend on your income and expenses.

You can use our borrowing power calculator to check how much you may be able to borrow.

How we can help

If you’re looking to get an investment property loan, our experienced and licensed brokers at Wisebuy Investment Group can help. We can also help you with your application.

We service a diverse range of clients in the popular Newcastle, Lake Macquarie and Maitland areas. Our brokers work with more than 60 lenders in the Australian market.

Contact us today for an obligation-free chat to find out more.