JUMP Property have reviewed an article in Smart Property Investment Magazine (a magazine written by investors for investors) and we particular like this article on maximising an investors borrowing capacity.
At some point an investor building an extensive portfolio may reach the bank’s maximum lending limits. Investors can try to stay off the bank’s radar by focusing on balance and diversification.
Balance means investors should aim to have a mix of cash flow properties and negatively geared properties, so that your personal discretionary income isn’t to impacted by your property investments.
Eventually a bank may refuse to extend any more loans to a heavily leveraged borrower. In this case, investors may be able to push past these limitations by moving to a less strict lender.
If you start out by knowing you have a $2 million borrowing capacity, you go to a more conservative bank for the first two or three properties. Once you get closer to your borrowing capacity, you go to banks that are easier on serviceability.
At the same time, investors should keep in mind that banks are likely to provide discounts for clients with multiple loans.
Spreading your loans among lenders helps mitigate risk in your portfolio, as well as allowing you to grow your holdings more aggressively. However, investors will almost certainly need the assistance of a broker to navigate each banks policies.
Most investors would be well served by establishing a relationship with a quality broker who specialises in investment property to unpack that strategy.
Rebecca Hughes, Director at GR8NUMBERS is a qualified and experienced mortgage broker and can help investors achieve their goals of maximising lending capacity by having a thorough understanding of all the pitfalls with bank policies.
# Reference: Smart Property Investment, written with the permission of Sterling Publishing.