05 Sep 10 lending tips to secure finance today
It almost seems that every day brings with it new lending policies, doesn’t it?
Interest rates are changed for investors and interest-only lenders, while loan to value ratios seems to be more fluid than a retreating tide.
While it can be difficult to understand the current lending landscape, that doesn’t mean that finance is not still available.
In fact, we’re busier than ever, as more and more people are recognising advantageous market conditions in a variety of locations across the country.
However, investors also understand that lending criteria are changing rapidly. They’re seeking professional assistance to greatly improve their chances of getting their home loan applications approved.
In fact, that’s one of our 10 lending tips that can you help you secure finance today. Let’s take a look at them, shall we?
- Seek professional advice – you want people on your team that are specialists
If you’re serious about being a homeowner or property investor, it makes financial sense to have professionals on your side, who can help you achieve your dreams and goals.
This is especially true at the moment given the complexity of the lending landscape.
When you’re sick you go to the doctor to get better, don’t you?
(Well, unless you have a “man flu” – we all know nothing can cure that!)
- Consider your living expenses and ensure you can justify them
It’s an unhelpful fact that most people spend far more than they earn.
What’s even worse is that most people don’t even know how much it costs them to live every month.
If you’re expecting a bank to lend you $500,000, you must have a good understanding of what your living expenses are.
If you don’t know, or can’t justify them, what do you think that will do your chances of getting a loan approved?
- Principal and interest loans are not the enemy
Sophisticated investors know that interest-only loans help with their cash flow, and help them maximise their allowable tax deductions.
But in the current environment, when interest-only loans are considered bad, it’s probably a good idea to consider principal and interest loans instead.
If principal and interest is the only loan that you’re going to get approved, then that is still better than missing out on investment opportunities, isn’t it?
You just need to consider all your options and cash flow requirements to ensure it’s the right strategy for you.
- Interest-only loans aren’t that bad
Interest-only loans play an important role in property investment strategies.
Again, as long as you have a plan and can manage the repayments “as if” you were paying all your loans, principal and interest, then you’ll be fine sticking with interest-only.
- Put the additional funds away in an offset account to build your buffers
Another tip to employ is to have access to your savings, to help finance your next property purchase, or to underpin your cash flow.
For existing property owners, this means saving your additional funds in an offset account, which will reduce the interest component of your repayments.
Those funds are also much more accessible than if you’ve paid off more principal from your home loan.
Financial buffers will not only enable you to invest again more easily, but will also ensure you have money when you need it the most.
- Buying the right properties is paramount
The problem with the recent strong market performance in Sydney and Melbourne is that many people will believe that it was their personal investing “prowess” that helped their property grow in price.
But the fact of the matter is that a rising tide lifts all ships.
It’s when the tide (or market) retreats that some ships (or properties) remain afloat, while others become stranded on the beach with flat-lining or falling prices.
Analogies aside, what we mean is that buying the right investment grade properties from the very start will help your portfolio outperform the averages, regardless of market conditions.
- Buying time is much more important
One of the key lessons in investment success – it’s time in the market that matters the most.
That means buying the right properties and holding them for the long term.
Now that can be easier said than done, which is why it’s vital that you have sufficient financial buffers in place to allow you to hold over a number of property cycles.
- Sometimes saying “no” is the right thing
No one likes hearing “no” but sometimes it’s for the best – you just can’t see it at the time.
The current lending restrictions are being enforced for a reason – the government regulator is worried about the market.
There has already been plenty of banter in the media about the property bubble bursting, which is unlikely to happen if you ask me.
However, paying too much for a property at the peak of the market is usually never a good idea.
So even if you get a “no” from lenders, it may be the opportunity to thoroughly consider your personal circumstances and plans instead.
- Get your properties regularly re-valued
There has been extraordinary growth in the Sydney and Melbourne markets over recent years, which means that property owners have increased equity.
Smart property investors know that they can multiple that equity by using it to invest again and again.
And the way they do that is by getting their properties regularly re-valued and re-using their equity upswings by investing in more property.
- Have a plan in place
Far too many people become accidental or haphazard investors.
While they might achieve some limited success, they’ll probably never gain financial independence or freedom.
The reason for this? A failure to plan is a plan to fail.
Make sure you have a plan in place – and update it often.
If you don’t have one – get one sooner rather than later.
How on earth are you going to find your way to financial success if you don’t know where you’re going?
The information provided in this article is general in nature and does not constitute personal financial advice. The information has been prepared without taking into account your personal objectives, financial situation or needs. Before acting on any information you should consider the appropriateness of the information with regard to your objectives, financial situation and needs.
This article was originally published on Intuitive Finance.