16 May Collateral
Collateral is basically what usable equity you have in your home or other real estate investments. I say usable equity because in some cases it may be beneficial to utilise the Mortgage Insurers and get 90% against the value if your equity position is weak.
Most financiers will lend up to 80% without the need for the applicant to pay for mortgage insurance, but this can get as low as 60% with some institutions.
The percentage of equity which is deemed to be usable is also affected by what type of property is to be used as security.
For example, financiers will generally not lend as much on a rural or a rural residential property as they will on a Residential A or house block. Similarly, the usable equity in a commercial property is only about 70%, not the 80% commonly available in residential property.
Generally speaking, most applicants are weak in one or more of the Three Golden C’s. It is the job of a smart finance broker to assist their client to overcome these weaknesses. Sometimes this must be done over time, however there is no reason anyone cannot qualify for real estate investment loans given the right advice, time and sometimes active action on the part of the applicant.
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