Amid a tight lending environment and the financial services royal commission, should investors continue to seek financing from major banks or should they start considering third-tier lenders?
Right Property Group’s Victor Kumar said that choosing a lender depends largely on which lender can provide you with the financing you need at the best rate possible.
Investors must also consider the loan product which would best fit their personal and financial circumstances, as well as the current state of the market and the economy.
For instance, third-tier lenders often limit the options available to investors who are suddenly unable to make repayments on their home loan.
According to Mr Kumar: “It makes your portfolio and your situation not as liquid. If you ran into trouble down the track or if you had a change in circumstances, your only option is to sell out of that property. You've got to take that into account when you're looking at the lender.”
“There are several things at play here. There’s nothing wrong with, say, third-tier lenders, but you've got to question why you're going down that path.”
Aside from the possible limitations, investors are also encouraged to consider the lender’s internet banking services, which has become increasingly popular in today’s technologically advanced age.
Good internet banking services allow investors easy and transparent transactions. This could also help in comparing loan products more effectively, ultimately incorporating good financial management onto their long-term investment strategies.
“There’s an ease of transaction and you can look at all your fees and charges instead of just focusing on the interest rate. If you can see all the fees and charges that they are implementing, you can compare apples with apples rather than just going with a brand or a company,” Mr Kumar said.
Finally, the property expert recommended speaking with a good mortgage broker, where appropriate, to be able to understand the pros and cons of seeking finance from particular lending institutions and ultimately choose the best option based on your financial and personal capabilities and limitations.
“A good mortgage broker can have a good look at what you can borrow and make good recommendations. Mortgage brokers are worth their weight in gold, so lean on them and they should be able to help you out,” he concluded.