If your client wants to increase their borrowing capacity to invest in multiple properties, your client should do the following.
Review their security
If your client purchases an investment property, most banks will allow them to borrow 90% of the property value. When determining whether or not to approve your client’s loan application, the bank will want to see if they have a large enough deposit to cover the difference in the purchase price plus all the associated costs. In most cases, this will require your client to have a deposit that is at least 10% of the purchase price. If they already own a property, they can use the equity in their current property to borrow 105%.
Improve their servicing capacity
When a lender determines your client’s serviceability, they will use your client’s income, expenses and liabilities, including credit cards, loans, your client’s age, possible dependents and debts. Your client can improve their borrowing capacity by paying off debts, raising their rental income (if applicable) and closing credit cards. They can also increase their borrowing capacity by improving their credit score.
Your client can improve their credit score by:
- Making their scheduled repayments on time
- Paying off debts and defaults
- Limiting the number of loans they take out
- Consolidating their debt when possible
It can be challenging for investors to increase their borrowing capacity to invest in multiple properties. However, it is not impossible. Whether your client is an experienced investor or just starting, Mortgage Street may be able to help. As a non-bank lender, we can sit down with your client and get a complete picture of their financial situation. We can help them improve their loan application to increase their borrowing power. Our brokers are also experts in investment loans, meaning we may secure them a more competitive loan than those offered by traditional lenders.