How Lenders Evaluate FIFO Workers for Investment Loans
As a FIFO civil engineer, you're probably thinking about buying an investment property to build long-term wealth. The good news is that banks and lenders across Australia recognise the earning potential of FIFO workers. However, they also apply specific risk assessment criteria when evaluating your investment loan application.
Lenders look at FIFO employment differently because of the unique nature of your work arrangements. Your income might be higher than average, but the contract-based nature of FIFO roles means lenders need additional assurance about your ongoing borrowing capacity.
When applying for an investment loan, lenders typically assess your employment history, contract duration, and the stability of your employer. They'll want to see consistent FIFO employment over at least two years, along with bank statements showing regular income deposits.
Key Risk Factors Lenders Consider
When you're buying a rental property, lenders evaluate several risk factors that specifically apply to investment loans:
• Loan to Value Ratio (LVR) - Most lenders prefer an LVR of 80% or less for investment properties to avoid lenders mortgage insurance (LMI)
• Rental yield potential - The property's ability to generate rental income
• Property type - Whether you're buying a town house, apartment, or stand alone dwelling
• Location factors - Proximity to employment centres and infrastructure
• Your existing debt - Including your primary residence and other commitments
For FIFO workers, lenders also consider the remote nature of your work. They want to know you can manage a rental property from a distance, which is why many FIFO investors choose properties in areas where they have family connections or professional property management is readily available.
Property Market Research and Investment Strategy
Before you invest in real estate, thorough research property analysis is crucial. This isn't just about finding a property you like – it's about understanding the investment fundamentals that lenders will scrutinise.
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Start by examining rental yields in your target area. Calculate potential returns by looking at similar properties and their rental income against the purchase price. Remember to factor in ongoing costs like council rates, insurance, and maintenance when calculating investment loan repayments.
Property investment strategy plays a significant role in how lenders assess risk. If you're buying your first investment property, focus on established areas with proven rental demand. This approach typically receives more favourable assessment than purchasing in emerging areas with unproven rental markets.
Understanding Investment Loan Features and Costs
Investment property loans differ from home loans in several important ways. The interest rate on investment loans is typically higher than owner-occupier rates, though you may qualify for interest rate discounts based on your loan amount and deposit size.
Most lenders offer both variable interest rate and fixed interest rate options for investment loans. Variable rates provide flexibility but can fluctuate, while fixed rates offer certainty for budgeting your rental property loan repayments.
Additional costs to consider include:
• Stamp duty on the property purchase
• Legal fees and building inspections
• Lenders mortgage insurance if your LVR exceeds 80%
• Ongoing property management fees if you're using a rental agent
For FIFO workers, property management is often essential given your work location constraints. Factor these costs into your investment loan application calculations.
Application Process and Documentation
The investment loan application process requires comprehensive documentation. As a FIFO worker, you'll need to provide additional evidence of employment stability compared to traditional employees.
Prepare the following documents:
• Recent bank statements showing salary deposits
• Current employment contract and any contract extensions
• Previous contracts demonstrating ongoing FIFO employment
• Tax returns showing consistent income
• Details of the property you're purchasing
Many lenders now offer a streamlined application process for investment loans, but FIFO applications may require additional assessment time due to the specialised nature of your employment.
Building Your Investment Property Portfolio
Once you've successfully purchased your first investment property, you might consider expanding your investment property portfolio. Lenders assess additional investment loans differently, taking into account your existing rental income and property management experience.
Negative gearing considerations become important as your portfolio grows. While negative gearing can provide tax benefits, lenders want to see that you can service all loan repayments from your FIFO income without relying solely on tax deductions.
Successful FIFO investors often start with one property, demonstrate effective management and positive rental returns, then gradually expand their portfolio. This measured approach helps maintain strong relationships with lenders and access to competitive investment loan options.
Call one of our team or book an appointment at a time that works for you to discuss how we can help you access investment loan options that suit your FIFO lifestyle and investment goals.
