In the current climate, obtaining an investment loan or even refinancing can prove to be a maze to navigate, as lenders assess borrower’s incomes and their nature of employment to best ensure that the evolving pandemic won’t impact their ability to continue servicing a loan.
However, if your investment goals are still able to be carved during this time, while lenders will ask you more questions to cushion you against the potential financial set-backs as brought on by the virus, nailing the fundamentals of loan approval is a sure way forward.
Nancy Youssef from Classic Finance shares with Your Investment Property editor, Sarah Megginson, how borrowers can understand what lenders will be looking for in a perfect loan application.
“Most importantly, they’re looking at your incumbent expenses,” Youssef shares.
“They need to determine that you can afford the loan but also the expenses that you’ve declared are accurate.
“How they do that is they collect up to three to six months’ worth of savings statements to see what your expenditure is like, and also to confirm that the income you’ve declared is what’s being received,” she explains.
When it comes to already holding a loan, which is common for investors who are cultivating a property portfolio and expanding their asset base, Youssef says that lenders will have a close look at your repayment history on these existing loans.
“It’s imperative that you are making your repayments on time … lenders typically will ask for statements to confirm what your conduct has been like on some of your existing loans, so ensuring that your repayments are up-to-date and made on time does build your credit worthiness to a bank,” Youssef shares.
She adds that lenders will want to place a tick beside stable employment and income; two areas that are fairly uncertain for households that have either had their incomes reduced or entirely upheaved by COVID-19.
“Lumping income tends to be looked and frowned upon,” Youssef says. “Similarly, if you’ve got a lot of movement in your employment, that does create a little bit more concern.”
With more people working at home via digital screens – while it’s valuable to have information at your fingertips – Youssef warns of the traps of lodging multiple applications online in the hopes of increasing the chances of receiving an approval.
“A lot of the time, clicking ‘Apply Now’ doesn’t actually work in your favour because it may add additional notations on your credit file … certainly speak to a mortgage broker or somebody who knows what the bank is looking for,” she says.
