INVESTMENT LOANS

Most lenders will look at investment lending up to 90 per cent of the property value with lenders mortgage insurance applying above 80 per cent, so a 10 per cent deposit plus costs is often the practical floor, and a 20 per cent deposit avoids the insurance entirely and opens up better pricing. The deposit does not have to be cash. A very common approach in Melbourne's north is to release equity from an existing home, using the available equity above the 80 per cent mark as the deposit for the investment purchase. You still need funds for transfer duty, which is not reduced for investors, plus conveyancing and inspections. We will model a cash deposit and an equity release side by side so you can see the difference in cost and in risk.

Not as a single loan against the investment property alone. What people usually mean by a 100 per cent investment loan is a two-part structure: an equity release against a property you already own that covers the deposit and purchase costs, plus a separate loan of up to 80 per cent against the new property. The result is that no cash comes out of your pocket, but you are still borrowing against real security and both loans are assessed on your ability to service them. It is a legitimate and widely used structure. It also increases your total debt and your exposure if values move, so we model the servicing at a buffered rate before recommending it.

No, our service is paid by the lender on standard residential investment lending, in the same way as an owner-occupier loan. The costs that do apply are the lender's and the government's. Investment loans are commonly priced above owner-occupier loans, and interest-only lending is usually priced above principal and interest, so the structure you choose affects your holding cost. Package fees of roughly $250 to $400 a year are common where a rate discount applies, lender application and settlement fees range from nil to around $800, and transfer duty applies in full with no first home concession. Victorian land tax may also apply once your total land holdings pass the threshold, which is a question for your accountant rather than for us.

Interest-only means your repayments cover only the interest for an agreed period, commonly one to five years, which keeps your holding cost lower while you hold the property. Principal and interest reduces the balance from day one, costs more each month, and is generally priced more keenly. The trap with interest-only is the expiry. When the period ends, the loan reverts to principal and interest over the remaining term, so a 30-year loan with five years of interest-only repays the whole balance over the remaining 25 years, and the repayment step-up can be sharp. Interest-only also affects how some lenders assess your capacity for future purchases. We will show you both, with the expiry modelled, rather than defaulting to whichever carries the lower repayment today.

Cross-collateralisation means the lender holds both properties as security for both loans, which is convenient for the lender and frequently unhelpful for you. It makes selling one property complicated, because the lender must reassess the whole position and may require the proceeds to reduce the remaining debt. It makes moving one loan to a different lender difficult without unwinding the entire structure. It also concentrates your whole portfolio with a single lender, so one change in their policy affects everything you own. We prefer standalone securities with a separate equity release where the numbers allow it, even when a lender pushes the other way. Occasionally cross-securing genuinely is the only way to make a purchase work, and if that is the case we will explain the trade-off rather than hide it.

Because lenders do not count rental income at face value. Most apply a shading of around 20 per cent to allow for vacancy, management fees and maintenance, so $500 a week of rent may be assessed as roughly $400. At the same time, the new loan's repayment is assessed at a buffered rate well above the actual rate, and any existing investment debt is assessed the same way. The result is that the property adds less income than it adds liability, which is why capacity often falls rather than rises on the second or third purchase. The size of the shading and the treatment of existing debt varies between lenders, which is exactly why we test the file across several before choosing one. If your capacity has stalled, the lender may be the problem rather than your finances.