A successful property investment has the potential to increase your wealth and provide financial security for you and your family. However, investing in a property is not an instant road to riches.
Buying a property has a lot of associated costs. You need to provide a deposit and make regular monthly repayments. This can be a heavy load, especially if you haven’t completely paid off your first home loan. But if you’re able to accurately calculate the cash flow from your investment property, you may find that owning an investment property is still affordable.
Can I afford an investment property?
Your borrowing capacity is an important consideration when applying for an investment home loan. You can use our borrowing power calculator to see what your borrowing capacity is, based upon your income and expenses. Remember, this calculator only offers a general guide. It’s still best to speak with a lending specialist at loans.com.au, or get your loan application pre-approved to get a more accurate result.
Knowing your borrowing capacity does not mean you you have to buy a property of around that price. Loan repayments are not the only thing you need to pay for when investing. You’ll also need to pay for other things like insurance, stamp duty, maintenance, property manager fees, and land tax to name just a few. So it’s imperative to budget first and see how much you can really afford.
For an easier way of budgeting, you can use an investment home loan calculator to estimate how much interest you’ll be paying, your monthly repayments, and the total amount you will repay on your investment home loan. The result of this calculator will generally be based on your loan amount, interest rate, and loan term.
Finding for the right investment home loan
When it comes to financing, it’s essential to find for the right mortgage for your needs. Other than a low investment property loan interest rate, you should also look for the ideal rate type and mortgage features that can be attached to your loan. A fixed rate loan, a variable rate loan, or even a split loan are the types of interest rate you can pick from.
While a variable rate loan can be a good option to add features to your loan, a fixed rate loan may also be worth considering if you need predictable monthly repayments.
Alternatively, interest-only repayments are a loan feature that allows you to pay only only interest and no principal for an agreed period of time. This can be a good option for property investors as this can increase the tax effectiveness of an investment. This can also be a good option to free up some cash to invest in other things such as another property.
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