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Frequently Asked Questions
Here are some answers to the questions most frequently asked:
Who is Investloan?
- Investloan is a sister company of Custodian that was established as a finance broker to source loans on behalf of Custodian clients.
- Investloan acts for a panel of approximately 30 lenders, however, only four or five of those meet the requirements set down by Custodian of loan value ratio, debt service ratio, disclosing bank valuations and structures to duplicate once not cross collateralising with your own home. Over 90% of Custodian clients use Investloan for their financing.
What is a DSR?
It stands for Debt Service Ratio, and is used by the lenders to determine your ability to service a loan.
What is times Coverage?
This is a calculation that lenders use to test the affordability of loans. It is based on your net surplus compared to your level of outgoings.
What is mortgage insurance?
This is a one-off fee charged by the lender to protect them against loss: you may be the one paying the fee, but it is the lender that is protected! It is generally charged when the LVR is above 80%. The cover pays the difference between the funds received by the lender if your property is sold and the total amount of your loan.
What is LVR?
This stands for Loan to Valuation Ration. It is calculated by dividing the loan amount sought by the total valuation for the security property. This determines the level of risk the bank is taking in making the loan (and therefore whether mortgage insurance is payable).
What does cross collateralisation mean?
Cross collaterisation means that a lender may take a mortgage over your investment property but then further secure it against your principle place of residence or some other property that they have financed.
What do you use the A & L for?
Simply to measure your current borrowing capacity.
Do we have to sell our portfolio to obtain equity?
No.
What is serviceability?
This is simply your cash flow that you generate to service your loan.
What is the best structure to buy an investment property in?
This will depend on where your income comes from but generally in your own name or wherever else you can generate income. If you have a complicated structure for generating income, it may be worth referring to your accountant.
Is an equity loan or a redraw facility better?
It is advisable to always obtain a separate equity loan when raising a deposit for an investment property purchase. Redraw facilities should only be used on your own home for personal expenditure and not for investment. At tax time it makes life much easier for your accountant to decipher what is personal and what is for investment if you get a separate equity loan each time.
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