With the Reserve Bank Official interest rate at a record low of 0.75%, and many lenders cutting their variable home loan interest rates, now really is the time to look at investing in property.

There are lots of financing options available, but there are certain things lenders look at, like your credit history and your ability to pay the loan.

The key to getting the best loan at the best rate is to make yourself as attractive as possible to lenders.

Here are five ways to prepare yourself for a loan and make your situation attractive to lenders:

Know your credit ratings

To ensure they know you can service the loan, financial providers will run a credit check and get a copy of your credit file. The good news is, thanks to comprehensive credit reporting, banks now get a clearer picture of your ability to pay a loan because both the positive and the negative aspects of your credit history is included.

Before this was introduced, banks would only look at the negative aspects of your credit history such as looking at how much your personal loans, car finance and credit cards were. Now they also have access to the positive aspects of your credit history so they will see, for instance, that you have never missed a payment on your car loan and you pay your credit card off each month to avoid additional interest rate charges.

If you know what’s on your credit file, you can take steps to improve it and prepare answers for any questions a provider may have. Unfortunately, if you have too many enquiries on your file, a lender will wonder why, and it may affect your loan application. The good news is, some online services offer a free credit check, which doesn’t affect your ratings.

Organise your paperwork

When you are applying for a loan, there is quite a bit of form filling in. It’s a good idea to organise your paperwork so you can easily find what is needed when the time comes to look for a loan. Most lenders require:

• Six months of bank statements of every bank account you have
• The last three or four payslips (for PAYG employees)
• Last two years of tax returns (self-employed or contractor)
• Details of other loans, including the amount, repayments and length, and statements to show your repayment history
• Credit card details, limits and repayments for all cards

Show good financial acumen

It’s always a good idea to demonstrate you’re on top of your finances and living within your means. Pay down your credit card debt, and look at ways in which you can perhaps consolidate any loans. Try not to miss payments or go over your overdraft limit.

If you’re not doing so already, make regular payments into a savings account.

Know your financial position

Know your outgoings, live within your budget and work out where savings can be made. It’s always a good idea to speak to your accountant who can advise on points to consider for your financial situation, such as the tax deductible benefits applicable to investing in property.

Speak to a broker

The big four banks do have some excellent deals, but it’s a good idea to speak to a broker too. Brokers have contacts with a whole range of providers, and many of these provide loans for people who are in non-standard situations.

While we are not financial experts, we can give you information of what to consider and points to check when you’re thinking about a loan – and lots more information about investing in property! Contact us on 02 4956 9777, send us an email to mail@newcastlepropertymanagement.com.au or pop into our Cardiff office for a chat.

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