Home lenders have definitely tightened their criteria in financing investment properties, but a local expert says a comprehensive plan could help borrowers get the tick of approval.
Mark Edlund of Clarity Financial Group says the presentation of a sound investment strategy that considers all the angles could satisfy the most risk-adverse lender.
“There’s no doubt lenders have significantly tightened their criteria, but they are still open for business,” he says.
“It’s just that the bar has been heightened as far as loan applications are concerned with lenders conducting far more due diligence on applications.”
Edlund says potential borrowers should first review their credit histories, which could be obtained through their mortgage broker or an online service like Veda (now Equifax).
“There’s a lot more emphasis from lenders on your repayment history against a range of services and credit cards – these histories can now be reviewed in detail,” he says.
Edlund says borrowers should approach their application with a well thought-through investment strategy.
“You should know why you want that property; what is it going to do for you and over what period of time?” he says.
“Ideally, you will be able to demonstrate security of employment and a level of equity in your own home. Lenders also want to understand all your other financial commitments and realistic living expenses.
“Several years ago, you might have needed a lender to score you eight out of 10 to secure that loan; these days nothing less than a perfect 10 will do,” Edlund says.