There are many strategies for
buying properties and investing, and the right one for you depends on your end
goals.
Are you looking to get into the
property market on the ground floor? Are you buying an investment now to move
in to down the track? Or are you looking to build a diverse property portfolio
to help you retire comfortably?
Ideally, you can have this
discussion with your mortgage broker before you start buying, in order to set
you down the right path: buying the right properties and using the right
lenders/loan products to suit your future goals.
The first place to start is how you’re going to come up with the
funds for the deposit, and there are a few different options.
Savings
Many first time purchasers are
buying a property to live in, and a popular type of deposit in this instance is
hard-earned savings. For an owner-occupied property, there is no tax benefit of
the interest paid on your loan, so you will usually want to minimise the amount
borrowed and pay the loan off as quickly as possible.
Equity
Some people buying their first
investment property have already built up useable
equity in their own homes. Borrowing against your owner-occupied home for the
deposit for an investment property is a common way to start your investment
portfolio, and can have positive tax implications over using savings as a
deposit. Usually you would need to do an increase on your existing loan in
order to access the funds.
Cash bonus
Sometimes, buyers are in the enviable
position of receiving a gift from family to use as the deposit for an
investment or owner-occupied purchase. This usually reduces the loan amount and
borrowing costs for the purchasers who then have smaller repayments and can pay
the loan against property principal down faster, or build up equity to
purchase again.
Guarantor
Another option available is a family guarantee. This is when
family members, usually parents, have enough equity in their own homes that
they can ‘lend’. This does not require borrowing against their house directly,
but rather the loan on your purchase is secured by a limited value on their
property as well as the new purchase. This is usually a temporary measure, and
once the value of the purchased property goes up enough or the loan is paid
down sufficiently, the parents’ house is released as security.
To find out which type of deposit
will work best for you, give your broker a call and begin your investment
journey today. If you don’t have a broker, contact Aussie and we will connect
you with your local Mortgage Broker for a free
appointment.
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