Owning two properties is a great financial ambition and with Australian house prices on the rise, doing so has great potential to improve your financial situation in the long term. But please don’t be fooled – just because you have done it once before doesn’t mean it will be easy! Buying a second property also requires hard work, discipline and effort. Here are some financial pointers to help with the process of buying your second property.

1. 1. Property purchase purpose
      The first thing you need to understand is why you want to buy a second property. Are you planning to rent out your original property and buy something else to move into? Are you buying a ‘renovators dream’ to knock down and develop? Are you buying because you want a beach house and you will spend half your time in each location?

      Really understanding why you want a second property before you set out will help to inform all your other decisions in the property purchasing process. For example, if you are buying as an investment property, decisions around location, capital gain potential and rental yield will influence you in a different way than when you are buying something for yourself to live in.

   2. Your cash flow and budget
      There are no two ways around it – having a second mortgage is going to have a significant impact on your monthly cash flow! Ask yourself: can you easily service both mortgages? Do you have a stable income?

      Better still, keep a budget so you know what you can reasonably handle so you won’t over-extend yourself. The key here, and this is what a lender will look for, is your ability to earn enough to service both your first and second mortgage effectively, on top of the cost of living.

      It is important to fully assess and understand your borrowing capacity. (We can help you with this – just give us a call). As with any other home loan application, your second mortgage will be assessed on your income versus expenses. Lenders will look at your overall position of asset and liabilities, which means if you have any existing debts such another mortgage (which you do have), personal loans or credit cards, your borrowing capacity is going to be less, compared to if you were debt-free.

      When considering your cash flow and budget, it is also well worth including a ‘safety buffer’ contingency plan. This could be three to six months’ worth of repayments and living expenses, or similar, depending on your savings ability. It is important to have a safety buffer if you are hoping to use your owner-occupied property as security to fund the deposit for the second home.

   3. Will you be renting out one of your two properties?
      If the answer is yes, and for most of you we imagine that you are buying a second property for investment purposes, it’s essential to get a rental estimate for your second property before you make your purchase.

      If you are just in the research stage, having a rough estimate of rental income will help with setting your budget and understanding your cash flow (see point 2), but if you have chosen ‘the’ property to buy, most lenders will require a rental estimate letter from the real estate agent currently handling the property at the application stage.

      Lenders will factor in any possible rental income (if applicable) when determining your borrowing capacity, ensuring it is set at a safe limit – reducing your risk and theirs!

      When choosing a property for rental income, it’s important that the property is well located and will be easily tenanted so that it continues to generate income and support itself.

   4. Loan type & loan structure
      Interest rates have been very low for some time, which makes it a great time to consider buying a second property. And right now there are literally thousands of home loan options out there for you to consider. However, there are many variables to take into account when financing your second property purchase – so it’s a good idea to give us a call. Finding the right home loan product for your financing needs depends entirely on your current financial position and your short and long term goals. This is why the right advice is imperative when taking on a higher amount of debt across two different properties. It is best to speak to us about these options and the best way to structure your finances, before you even choose a property to buy, so you don’t get stung later on in the process. A few scenarios we could discuss include:

      Using your existing equity
      If you’ve lived in your first home for some time, there’s a good chance you have grown your equity. Equity is the difference between what your home is worth and how much you owe on it. For example, if your home is worth $550,000 and you owe $200,000 then you have $350,000 in equity.

      Tapping into this equity could give you a larger deposit for your second property purchase, which could be beneficial for your borrowing capacity and your overall budget. If you’re looking to do this, you will need to have your home revalued. In order to determine how much equity you have in your home, a lender will perform a valuation using an independent valuer before determining how much you can borrow and approving your loan.

Refinancing or staying with your current mortgage lender
Buying a second property offers the perfect opportunity to give your existing mortgage a health check. Use the opportunity to consider your home loan needs in relation to your future goals and ask yourself how well your current loan is performing for you. If you’re satisfied with the service your lender is providing and you have determined that the interest rate and fees you’re paying are competitive, there may be no need to refinance to another lender. However, there are some record low rates on offer at the moment and if you have had your mortgage for some time, it would be worth talking to us about what other home loan products are suitable for you and your goals.

Buying your second property is by no means a small task. We are here to help you with your financial goals, so please chat to us about how we can structure your loan so your second property purchase can really set you up for the future.

They offer people the ability to live close to work and exciting entertainment hubs, where many a social drink can be had within walking distance of home. After all, who wants to live out in the burbs when you can be in the heart of the action? Sure, you might not have your own patch of dirt to toil over, but unless you’re over the age of 60, gardening is overrated.

Indeed, apartments offer attractive rental yields and an entry point into the market in locations that might otherwise be unaffordable for investors. Last May, CoreLogic anticipated there would be 231,129 new units set for completion across the combined capital cities by April 2018. And with such a large supply of apartments, price drops seem likely, so you may very well be able afford your own version of Carrie and Big’s “heaven on 5th”. Here are some tips for choosing the right investment apartment, and when you do, we would love to help you find the right loan!

Location, location, location!

Location is king when choosing an investment apartment – nobody wants to live in a box in the boonies! Proximity to amenities such as public transport, healthcare, recreational facilities, childcare and schools will impact on the rental appeal of your investment and the rent you can get away with charging tenants. Apartments and units with great tenant appeal also tend to experience more reliable capital growth, so choosing the right apartment can help you profit both ways.

Do your homework

Knowledge is power! We recommend you thoroughly research an area before buying. Consider supply and demand for apartment living in the area and find out what are other apartments are renting and selling for. That way, you’ll have a sound understanding of what a given property is worth and the potential rental yield.

Consider your future tenants

Think about who your future tenants might be and what they are looking for in a home. Will they be like Carrie, and require a massive built-in wardrobe to house their Imelda Marcos-style shoe collection? Perhaps features like a parking spot in the CBD may be in particularly high demand. If you can anticipate your tenants’ needs, your apartment is more likely to be highly sought after.

Consider the ongoing fees

As Samantha would say, sky-high strata fees are “painful and unnecessary”. Before buying, calculate your net rental yield to estimate your likely return, factoring in the strata fees, interest repayments, insurance, taxes, rates and water charges. Lastly, before you sign on the dotted line, don’t forget to organise a strata inspection report, which will raise any red flags about the accounts and records of the property.

When you do find an investment apartment that ticks all your boxes, we can help you find you a home loan that fits like a glove. As your mortgage broker, we’ll help you get a competitive rate from one of Australia’s leading lenders and structure your investment property loan so that you get the most out of it – now and in the future. Happy apartment hunting!

Last month saw notable growth in home values in Darwin and Hobart, and while we continue to see a two-speed market across the country, there are some great investment opportunities out there.

Interest Rate News

This month, the Reserve Bank of Australia (RBA) decided to keep the official cash rate on hold again at 1.5 per cent. The decision follows an announcement by the Australian Prudential Regulation Authority on Friday 31 March that financial institutions restrict new interest-only property lending to 30 per cent of their total residential mortgage lending, in a bid to manage heightened risks in the property market.

Many lenders adjusted rates outside of RBA movements this month and raised rates on both owner-occupier and investment loans. They increased rates on both variable and fixed-rate products. That makes it more important than ever to stay on top of your home loan interest rate. Check in with us and we’ll compare hundreds of different home loan products to find the right one for you.

Property Market News

Bidders are continuing to snap up properties at auction, with high clearance rates last week in Victoria, NSW, South Australia and the ACT. For the week ending April 2, Victoria had 1231 auctions, with a clearance rate of 80 per cent, while NSW held 1284 auctions, with a clearance rate of 78 per cent. South Australia and the ACT both had clearance rates of 76 per cent, while things were quieter on the auction front elsewhere.

In March, home values increased in all capital cities, with the biggest percentage changes month-on-month in Darwin (3.07%) and Hobart (3.06%). Darwin’s year-on-year home values dropped 4.41%, while Hobart’s increased 10.24%. Melbourne home values increased 1.92% month-on-month and 15.93% annually, while Sydney’s home values were up 1.41% month-on-month, and a massive 18.88% year-on-year.

Meanwhile, the proportion of total housing finance commitments to owner-occupier first home buyers is at an historic low. Talk to us to see how you can take advantage of recent improvements to the First Home Buyer Grant to get into the market sooner.

With interest rates remaining low, now is a great time to buy your first home, invest or consider refinancing. We’ll find you the right home loan to suit your personal needs and goals, potentially saving you thousands in the long-run. Call us today!