August 15, 2023
Investing in a rental property is a fantastic way for mostAustralian’s to grow their wealth. Unlike paper investments like stocks and bonds, property is an asset that you can see, touch and stand on. However, mostAussies just don’t know what the banks look for when deciding how much to lend.Keep reading and discover the 6 simple steps you can take today to help secure your first investment property.
When deciding how much to lend, banks look for something they call ‘genuine savings’. These are savings that you’re making each week, fortnight or month for a good amount of time. This means that a $40,000 deposit that has come from a parent or a bonus (i.e. ‘non-genuine savings) doesn’t look as good to the bank as $40,000 saved over 4 years.
Banks don’t look very favourably upon any extra debt you might have. This includes any personal unsecured loans, credit cards and any outstanding ‘Buy-now-pay-later’ debt link After-pay and Zip-pay. So consider paying down those established loans in order to give yourself the best shot at buying that investment property.
If you’re looking to buy an investment property you probably already have your own mortgage. Banks will often look at your ‘conduct’ on the loans you already have before lending you more money. Showing good conduct by always making repayments on time (or even making extra repayments) will always be viewed favourably when you decide to invest.
When assessing your financial position the bank will add up all of your assets (property, investments, savings etc.) and subtract all of your liabilities (mortgages, personal loans & credit cards). If your final number is positive this is good news to the bank and good news for your new loan. Make sure you’re always considering your number when taking out a new credit card or financing a new car.
Property equity is the difference between the value of your home and the amount you owe to the bank. This money can often be used as part or all of your deposit on a new investment property. So if you’ve been making extra repayments on your home or have just been living there for a few years you may have some equity to spare.
As mortgage brokers it’s our job to help you navigate the ins and outs of the lending world. In less than 20 minutes we can tell you how much you can borrow and how to implement even more great strategies to help you grow your wealth. If you’re thinking about purchasing your next property be sure to give us a call on 07 3355 1800 or email us at admin@carwardines.com.au
