Thinking about buying an investment property in Perth? You're not alone. Many Perth residents are looking to invest in real estate to build wealth through rental yields and capital growth. However, getting an investment loan approved requires more preparation than your typical home loan.
As Finance & Mortgage Brokers at G&T Finance, we help Perth clients access investment loan options from banks and lenders across Australia. Here's what you need to know about the investment loan application process.
Understanding Investment Property Loans
An investment property loan differs significantly from a standard home loan. Lenders view rental property loans as higher risk, which means:
• Higher interest rates compared to owner-occupier loans
• Stricter borrowing capacity requirements
• Higher deposit requirements (typically 20% minimum)
• Additional costs like lenders mortgage insurance (LMI) if your loan to value ratio (LVR) exceeds 80%
When you're buying a rental property, lenders will assess both your personal income and the potential rental income from the property.
Key Factors That Impact Investment Loan Approval
Your Borrowing Capacity
Lenders calculate your borrowing capacity by examining your income, expenses, and existing debts. For investment loans, they'll typically only count 70-80% of the expected rental income when assessing your application.
Loan to Value Ratio (LVR)
Most lenders prefer an LVR of 80% or less for investment properties. If you're borrowing more than 80% of the property value, you'll likely need to pay LMI, which can add thousands to your loan amount.
Your Property Investment Strategy
Lenders want to see that you've done your homework. Research property markets, rental yields, and have a clear strategy for your investment property portfolio.
Types of Investment Loan Options
Variable Interest Rate Loans
These loans offer flexibility with interest rate discounts and the ability to make extra repayments. The interest rate can fluctuate with market conditions.
Fixed Interest Rate Loans
Provide certainty with locked-in repayments for a set period, usually 1-5 years. This helps with budgeting and calculating investment loan repayments.
Interest-Only Loans
Popular among property investors as they reduce monthly repayments and can maximise negative gearing tax benefits.
What You'll Need for Your Application
The application process requires comprehensive documentation. Gather these documents before applying for an investment loan:
• Recent payslips and employment verification
• Bank statements from the last three months
• Tax returns and Notice of Assessments
• Details of existing assets and liabilities
• Property research and rental appraisal
• Deposit verification (savings history)
Choosing the Right Property Type
Whether you're considering a townhouse, apartment, or stand-alone dwelling, each property type has different lending criteria:
• Apartments: Some lenders have restrictions on high-density developments
• Townhouses: Generally well-received by lenders with good rental demand
• Stand-alone dwellings: Often preferred by lenders but typically require higher deposits
Additional Costs to Consider
When buying an investment property, factor in these additional costs:
• Stamp duty (varies by state and property value)
• Legal and conveyancing fees
• Building and pest inspections
• Loan establishment fees
• Ongoing property management costs
Making Your First Investment Property Purchase
If this is your first investment property, lenders may require:
• Evidence of property management arrangements
• Detailed rental market analysis
• Clear exit strategy documentation
• Higher deposit requirements
Maximising Your Chances of Approval
Strengthen Your Financial Position
Pay down existing debts and increase your deposit where possible. A stronger financial position leads to more investment loan options and potentially lower investment loan interest rates.
Professional Property Research
Demonstrate thorough research of the property market, including comparable sales, rental yields, and growth potential in your chosen area.
Consider Using a Mortgage Broker
Finance & Mortgage Brokers can access a wider range of lenders and help structure your application for the optimal outcome. We understand which lenders are currently active in the investment space and can present your application effectively.
The Benefits of Professional Assistance
Working with experienced Finance & Mortgage Brokers means:
• Access to a streamlined application process
• Comparison of multiple lender options
• Expert guidance on loan features and structures
• Support throughout the entire approval process
• Ongoing relationship for future property investments
Building a successful investment property portfolio takes time and the right financial partners. Whether you're purchasing your first rental property or expanding your existing portfolio, having the right loan structure is crucial for long-term success.
The Perth property market offers excellent opportunities for investors, from established suburbs to emerging growth areas. With proper planning and the right financial backing, your investment property goals are within reach.
Ready to start your property investment journey? Call one of our team or book an appointment at a time that works for you. At G&T Finance, we're here to help Perth investors secure the right investment loan for their property goals.
