Are you looking into investing in property through a home loan? There are several factors to consider when investing in a property, even more, when you are financing this purchase via a home loan.
An investment property is an ideal venture you could explore when aiming to put your money into something that grows and earn profits. However, investing in a home or a property that would later be sold to earn profits, entails knowledge and sacrifice.
Entering the real estate world is definitely not a walk in the park. If your finances are not abundant, you need to control your budget to be able to afford a property you’ll invest into. A home loan might also be necessary to fund your investment property.
However, being cash limited is not a hindrance for you to access a mortgage for an investment property in Australia. But, it is essential to have a long-term plan on how you will afford paying for a mortgage without hurting your regular financial needs, while making a profit out of your property investment as well. Sound complicated? We can help you through the process.
How Much Do You Need?
To be able to apply for a mortgage that is to be used to invest in a property in Australia, you need to determine the amount that you will need for the deposit as well as the amount you should have to repay your mortgage.
It is most common to be able to afford 20% of the total value of your investment property. This is the ideal amount you need to save up to be able to get the best rates possible and to avoid paying for LMI or loan mortgage insurance.
You can still go for a 95% LVR and pay as little as 5% for the deposit. But, this will require you to pay for LMI. To give you an idea, here is the average cost of deposit you’ll have to save for when buying a home in Australia.
Sydney – $51,000
Melbourne – $41,000
Brisbane – $27,000
Adelaide – $23,000
Perth – $24,000
Hobart – $23,000
Darwin- $25,000
Canberra – $34,000
If your budget are not within these median home values, you might want to explore properties in the regional areas.
Measure Your Financial Health
A mortgage calculator can help you understand if your current finances can afford repaying the mortgage for the property that you have in mind. This monthly repayment amount should not affect your monthly budget to be considered as a good investment.
Your debt-to-income ratio will play a big role in determining whether you are able to repay. Most banks and lenders are looking into an average of 30% debt-to-income ratio. For an income for $6,500, you should have around $1,950 available for regular loan repayments.
This is true, regardless of buying a property to be transformed into your home or getting a mortgage to fund an investment property.
Eliminate Debt
Before jumping into real estate investing and getting a mortgage to fund your investment property, it would be ideal to eliminate current debts that you have. Paying for debts while repaying a mortgage could likely weigh you down in terms of your finances. Prioritize letting go of the items that could make it hard for you to repay a loan.
Consolidating your debts would be a good idea. This could help you save in interest rates and make it manageable to pay your debts, now compiled in a single account.
Get Help From a Mortgage Broker
Your first attempt or even your second attempt in investing in a real estate property can be risky. You can have miscalculations, assumed the wrong things and numbers and your lack of experience may contribute to a less successful attempt in investing. To avoid this, you might want to enjoy the convenience and expertise a mortgage broker offers.
Mortgage brokers can confidently guide you through the process of purchasing a property and using a mortgage to fund your venture. Working on this with help, instead of testing the waters alone could save you thousands and avoid possible problems you might face in the future as you begin to repay your property investment.
Talk to an Intellichoice Mortgage Specialist today and get the help that you need.
