A:- The debt to equity ratio that most lenders are happy with varies from lender to lender, however as a general rule for a single residential dwelling in an acceptable location or a block of up to four units you should expect to get at least 80% LVR. Depending on circumstances you could get up to 97.5% (net) LVR.

LENDING AMOUNTS Q. How does a bank determine how much money I can borrow?

A:- Each lender has a pre-set servicing criteria that they use to calculate how much they will lend you. This is just one reason why you need an informed Finance Strategist who knows the servicing percentages each lender uses to get you the maximum borrowings. Our Finance Strategists also understand what types of income sources the lenders will use as acceptable sources of earnings, thereby again maximising your borrowings. For example some banks do and some banks don’t take certain part-time jobs, allowances, Centrelink payments for some dependant children and other incomes into account. Each of the hundreds of Lending and Banking Institutions calculate your ability to service the loan (whether you can afford the repayments) differently so a qualified Finance Strategist who is active in the business of finding the cheapest and best money for you is essential.

A:-   Yes they will, but they will only take into account a percentage of the rental income….usually 80% for residential   property.

LMI Q. What is LMI?

A:- LMI stands for Loan Mortgage Insurance. It is a once off insurance premium paid which protects the Lender for any shortfall or loss should the loan go into default and the Lender sells the security property as Mortgagee –in-Possession. It is important to note that it covers the lender’s situation and not the borrower.

Q. Who pays the LMI Premium?

A:- Ultimately it is the borrower who pays the premium. Whether the loan product states that the premium is to be paid at settlement of the loan, or that the premium is to be capitalised into the loan or that the lender pays the premium for the borrower, the borrower pays for it one way or the other. Usually if the lender pays it for the borrower the higher interest rate is reflective of this. For cash flow, tax or other purposes you will be advised by our Finance Strategists which method of payment is best for you and your circumstances.

Q. When is LMI Payable?

A:- Predominantly LMI is payable when the lender is providing funds over an 80% LVR (Loan to Valuation Ratio) and on all Low Doc loans above a 60% LVR and on No Doc Loans. However these parameters are slightly variable amongst lenders and do change from time to time. Our Strategists at Investor Loans Network are constantly seeking the best products on the market for our clients and keeping up-to-date with changes in the financial markets.

Q. What is LMI recovery and what does it mean to me?

A:- A lender will sometimes absorb the cost of the LMI insurance premium on a particular loan product. The loan documentation will then include a LMI recovery clause which allows them to recover a portion of the insurance premium from you if you pay out the loan within the first few years (typically this is within the first 3 years but you must check your loan documents to confirm the time frame). The amount they recover will be included in the figure they advise you when you request to satisfy the loan in full and will be pro-rated depending on how long you have held the loan.

LOC and RE-DRAW FACILITIES: Q. What is the difference between a line of credit and a redraw facility?

A:- A line of credit (LOC) is like having a big credit card. You are given an amount which you can use up to (ie. your limit just like a credit card). Your balance can fluctuate within the limit depending on your use of the funds. For example, your weekly pay goes in and your spending goes out (by use of a credit or debit card). A re-draw facility also has a capping on how much funds you can draw from it, however, the withdrawal of funds is by telephone banking or internet transfer rather than just by handing over a card at the supermarket. Having a line of credit requires a great amount of financial discipline. For this reason and so the use of the funds can be tracked more easily, many clients choose a redraw facility over a line of credit. Also a redraw facility usually attracts less fees to operate than a line of credit.

WHY USE A BROKER: Q. Why should I use a loan broker and not just see my bank manager?

A:- A loan broker has an array of lending products available to offer you, unlike a bank manager who will only offer his employer’s loan products. This gives you, the client, peace of mind that you are getting the best possible loan product on the market today suitable for you situation. In addition to this our finance strategists (aka loan brokers) at Investor Loans Network offer an objective viewpoint and suggestions on the right loan products and investment strategies, along with their knowledge and awareness of the importance of asset protection and tax implications. This all adds up to the very best for you in your continued education and financial gain as a property investor.

REFERENCE RATES: Q. What is the reference rate that the bank’s talk about?

A:- Each bank has a current reference rate. This is the rate set by the Reserve Bank plus the retail amount the lender adds. Think of it like a wholesaler and retailer – the retailer adds its “margin” to make its profit.