Tips for Getting a Great Loan at a Low Rate

28 Aug Tips for Getting a Great Loan at a Low Rate

The property investing ‘game’ is all about buying low and selling high. You have to factor your loan into this equation. To help you with this, here are a few tips for getting a property loan at a low rate.

First, it’s important to understand that lenders doesn’t really care about your vision. They just want to be assured that their investment is safe. Unless you have been doing business with a lender for a long time and you’re squeaky clean on your repayments, you can expect lenders to scrutinise your proposals very carefully.

To reassure a lender and get a favourable rate, always come prepared with a thoroughly researched proposal that ticks all their worry boxes.

  1. Lenders need to know an accurate “fire sale price” of the development. If you the economy suddenly went bust and you couldn’t find buyers or renters at the price you need to keep your head above water, what could the lender get if they had to sell the property before it’s fully leased or sold, or even before the project is completed?
  2. Lenders need to know the end value of the development. If your development is higher than the median price in your area it may be more difficult to sell and therefore less attractive to lenders. Don’t go overboard with blingy fittings and amenities that may not fit with the needs of the local market. Obviously you want to create a quality project, but there’s a huge difference between quality and luxury. When in doubt, go for simple elegance rather than extravagance.
  3. Lenders invest in market trends. Tiny apartments are less desirable than spacious ones, even if you have a desire to join the growing tiny home movement and wish to provide affordable housing options. If it doesn’t appeal to the market, it will probably not appeal to the lender. That’s not to say you can’t create your dream development – just be prepared to do so at a higher loan rate.
  4. Lenders prefer properties with growth potential. Lenders are more eager to invest in areas with a history of growth, preferably in larger population centres. They will be less keen to invest in declining areas, even if your development shows promise in helping to turn things around. Leave this type of investment to someone with deeper pockets. Follow people like this – the mavericks who are willing to invest in struggling areas – but don’t try to resurrect a declining area on your own unless you’re willing to carry a higher interest rate.
  5. Lenders are typically conservative and will usually prefer residential real estate to holiday resorts. This depends on the area, but in general you will get a more favourable rate with a low-risk development such as a housing complex for young families. Depending on your personality, you will either prefer high risk/high yield properties or low risk/low yield. There’s no right or wrong here; but low risk usually equates to low interest rates too, and it’s a great place for a novice investor/developer to start.

Eventually you’ll have a history with a lender and you may be able to convince them to give you a great deal on a riskier loan; but that’s not a place to start, especially if you’re new to property!

Social: Do you know what entices lenders to give you a good rate on a loan for your property development project? It’s not necessarily your good looks! Here’s what you need to know, so that you always get a good rate that will ultimately give you a higher ROI.

#lendersonlycareabouttheirinvestment #alwaysbepreparedwithnumbers #establishahistory