Are you looking to enter the property market?
Most people will focus on the property itself when they are thinking of investing and what potential ROI it could generate.
However, getting the right investment loan should be the first step because it governs your purchase power on an investment property.
In need of aid in finding the right mortgage? Get in touch with Steve from Mortgage Compare Plus
The process of getting a property investment loan may seem complicated, but below are a few tips on how you can find the right finance for you and have your investment home sooner.
#1 - Do Your Research
The language used around home loans and real estate investing can be confusing at best.
Before you apply for a loan, you first should be familiar with the various concepts including:
Tax concessions
Equity
Negative gearing
Depreciation
and tax concessions for property investors.
You will be in a better position to make an informed choice when you have knowledge. Remember, when it comes to property finance and investing - knowledge is power!
While having knowledge is certainly an asset, it goes without saying that decisions like this are best made from a mental state with clarity.
Experts from Mindset Mastery, a team of practitioners specialising in mental growth, suggest that major life decisions should be done with a clear mind. They say: “Often people make choices out of desperation, they want to make a change and they want it to happen overnight. But we’ve found clarity leads to better results in the long run.”
So reach out to an expert if you require clarity or support.
In need of expert advice? Find out more about the financial tips that will make 2020 your year.
#2 - Develop An Investment Strategy
Once you understand the language and know what is required of you, it’s time to come up with a strategy. This will help you identify the investment loan you need and what you must do to ensure you qualify.
In terms of strategy, some investors opt to use the “buy and hold” method in which they buy a property and pay it off in full over a certain period as they collect rent.
Other investors may be confident that the value of the property will shoot up quickly. In these cases they go for a different type of loan.
For instance, if you have paid off your home and have complete ownership, then you can use the equity in the property to secure finance needs for your new real estate investment.
The team at All Image Architects have dealt with many investors in that capacity. They explain “we have clients coming in from very informed backgrounds looking to build investment properties and what we have noticed is they have organised their finances to offer quick turnarounds for their investments. Planning is key to getting more value, and acquiring that value sooner”.
Alternatively, you can opt for a line of credit instead of the conventional investment home loan.
Overall, your investment strategy will inform your financial plans. Remember that you don’t need to be wealthy to invest. But you should have the ability to meet your financial needs, therefore, any investment option you opt for should fit your financial plans.
If you feel your current financial plan needs some improvement or you do not have one, then Steve from Mortgage Compare Plus is on hand to advise and guide you so that you can achieve your financial security.
#3 - Understand Repayment Types
Your choice based on the repayment terms will heavily depend on the strategies mentioned above.
For instance, you can opt for a loan that will have you make small interest-only repayments if you are sure that the value of your property investment will proliferate. Such a strategy will minimise the costs before selling the property and hope for a significant profit.
If you are thinking more about the long-term payments, then the interest-only loan will not be the best option.
According to the experts from Concept, “if you know that you will pay off the investment in full over an extended period as you also collect rent on the property, then the principal and interest loan will be the best choice since it will cost less. That way, you also will be able to build equity faster.”
#4 - Consider All Interest Rates
The interest rate on your investment loan is an essential factor that you cannot overlook.
The lower the rate, then lower the repayment.
A difference of 10 or 20 points may not seem like much, but these can add up to thousands of dollars in the repayments of the loan in the long-term.
Most investment loans have high rates, but you can find some that have rates that can be lower if you take the time to research. As you research, also take the time to decide if you want a variable or fixed interest rate.
With the fixed-rate loans, you will have a predetermined period in which you know the exact amount you will pay.
As such, you will be shielded from the unexpected rise of the rate, but you also will miss the benefits of the drop in the rates.
Unsure of what to do? Check out this guide to find out how to pick the best mortgage broker for you.
#5 - Consider The Features You Need
You should review the features of your loan before applying for it.
Give particular concern to the offset account for the investment loan. The offset account is like a bank account attached to the loan. The money in the account will be used to offset the principal on the loan temporarily.
Therefore, your repayments will remain the same, and you will be paying less in interest.
That means you will be able to save money and also manage to settle the loan in good time.
Keep these 5 valuable tips in mind and you’ll be ready to tackle the exciting world of property investment and everything it entails.
Looking for help? Chat to Steve from Mortgage Compare Plus to find out more today.
Author Bio:
Jack Poole is an Australian writer and business student living in Sydney. He is extensively knowledgeable in financial-related topics. Jack has a passion for the arts. When he’s not studying or writing, you’ll find him frequenting the art museum.
Disclaimer: This article provides general information only and may not reflect the publisher’s opinion. None of the authors, the publisher or their employees are liable for any inaccuracies, errors or omissions in the publication or any change to information in the publication. This publication or any part of it may be reproduced only with the publisher’s prior permission. It was prepared without taking into account your objectives, financial situation or needs. Please consult your financial adviser, broker or accountant before acting on information in this publication.