Buying an investment property is a great financial move to make, and this decision could potentially improve your financial well-being for years or even decades. However, you may be wondering how to invest in Australia real estate to maximize your profitability. Many people who invest in real estate in Australia will fund their purchase with an investment loan. There are many investment property lenders who are eager to extend financing to you for your purchase, and this allows you the ability to more strategically use your capital. However, each of these lenders offers different programs with varying terms. Before you apply for a home loan for investment property in Australia, you should carefully analyze the options as well as your financial needs to determine which loan program is right for your needs.
Choose Your Down Payment Amount Carefully
You can apply for a home loan for investment property with a wide range of down payment options. For example, some loan programs require investors to place up to 20 percent or more as a down payment. Other loan programs require 10 percent or less contributed as a down payment for an investment property in Australia. You should leave enough cash in your account to pay for closing costs. You also need to remain fairly liquid so that you can pay for repairs, cover the property if it becomes vacant for a few months and more. With this in mind, your down payment should be comfortable for your financial situation. In addition, your down payment will directly impact your monthly payment and your overall profitability. Using an investment loan calculator to estimate monthly payments at different loan amounts can help you to determine which down payment amount you may feel most comfortable with when buying your investment property.
Understand How Loan Rates Are Determined
Investment property lenders typically extend slightly higher interest rates on investor-owned properties than on private residences. In addition, rates may also be higher based on your credit rating and your down payment amount. You can research current home loan interest rates available for these types of loans today to get a better idea about what your rate may be. Doing so may inspire you to pay more money as a down payment or to make other adjustments to your loan request to qualify for a lower rate. Be sure to use an investment loan repayment calculator to estimate your monthly mortgage payment based on different interest rates.
Calculate Your Net Rental Income
When you find an investment property that you are interested in purchasing, the seller should provide you with ample details about the current operating expenses. If a tenant is currently in the property, the rental details should be provided to you. Otherwise, your real estate agent can provide you with current market rates for the unit. Through an analysis of these figures as well as of your estimated monthly mortgage payment, you can calculate your net rental income. Keep in mind that you can adjust your down payment and interest rate to increase or decrease the net rental income as desired.
Think About Long-Term Financial Goals
An investment property is typically a long-term investment. You may be purchasing it to produce a stream of relatively stable monthly income from the rents. However, you also want to accrue equity in the property by using the rents to pay down the mortgage balance over time. Some investors may need the property to have a certain amount of equity within ten or 15 years, for example. They may have plans to use this equity for retirement purposes or for other goals. You can easily use an investment loan calculator online that has an amortization schedule to determine if your monthly mortgage payment and your down payment amount are strategic for helping you to achieve your financial goals.
Buying an investment property in Australia can be a life-changing event. This is one of the few types of investments that you can purchase using leveraged funds, and this makes it easier for you to capitalize on your investment in the years to come. The investment loan that you use to fund your purchase can impact your down payment requirement, your net monthly income and even how quickly equity can accrue on the property. With this in mind, spend ample time analyzing the options, and use an online loan calculator to more easily make your calculations. These steps will help you to more easily set up the most strategically beneficial loan for your investment activities.
