With volatile markets and changes to super, more people are turning to property to help them reach their long-term financial goals.
Making a few financial changes here and there can help you get the best from your property, so here are a few financial hints to help your finances work that little bit harder for you:
Your mortgage choices
There are still lots of providers giving interest only mortgages, and for many investors, this is the best way to maximise their borrowing and help build equity. You can pay down the mortgage if you wish, but most prefer to pay down their home loan first; that way they maximise the tax deductions on the interest for the investment property.
Review your finances
It sounds obvious, but review your finances every couple of years or so. Many mortgage providers offer an interest only mortgage for a set period of time; when the time is up it reverts to a repayment loan. There are always new deals to be had as providers fight for your business, so make sure you review your finances regularly so you can take advantage of them.
And some points to consider when looking at loans is how long they’re offering you the deal, what happens when the deal ends and what the exit fees are if you pay the loan out – some exit fees can be very costly.
Avoid cross-collateralising your loans
Try to use different lenders for your loans. This isn’t always easy to do, particularly when you’re starting out. However, if you’ve cross-collateralised your property with other loans, the lender may insist you pay down the loan when the property is sold. Some lenders may also limit your borrowing options to a principle and interest loan instead of an interest only loan.
Under the new legislation, you are unable to claim deductions for plant and equipment purchased by a previous owner of that property, but you can claim it on anything you purchase. Talk to your accountant or call the ATO to confirm your situation.
Keep a reserve
Always prepare for the unexpected! Look into ways in which you can make your money work best, such as by having an offset account on your home loan. That way you can effectively be paying off more of your home loan, while having money readily available if you need it. If your mortgage provider doesn’t offer this option, look for other ways for your ‘reserve’ money to work for you, such as using a special savings account.
Use a specialist
We always advise speaking to financial specialists, and if you’re looking for the best mortgage deal, use an experienced, connected mortgage specialist, ideally one that specialises in investment property. That way you’ll probably get the best deal for your situation. A well-connected specialist will often be able to sort out loans for people with different financial situations, such as for freelancers or contractors, when regular providers have told them they won’t give them finance.
While we’re not financial specialists, having been in the business for over 40 years we do know a thing or two about property! If you’d like to know more about investing in property, our talented team would love to share its knowledge with you.
We are one of Newcastle’s longest established real estate offices, so give us a call on 02 4954 8833, send us an email to firstname.lastname@example.org or pop into our Cardiff office for a chat.
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