Getting a Home Loan in Australia if you're living overs...
29 Nov 2023
Investing in property is big business in Australia, the beauty of it is you can make the leap into property investment at any stage of life - realistically, you can never be too young or too old.
A key factor in determining the rates of return on your super is your underlying super investments. Usually, when you’re younger the higher-risk growth assets (which generally yield higher returns), are a good option given you have the luxury of time to ride the ups and downs of any market volatility.
However, for those investors who are older and are either retired or soon to be - slower-growth assets are a good option as your capital will be protected from investment volatility.
For those cracking into the property market for the first time, it’s important to note that your first step in doesn’t have to be as a owner occupier. It might be worth assessing whether it suits your circumstances more to make your first property purchase as an investor instead.
There is limitations to pursuing this option however, like not having access to first home owner grants and stamp duty concessions. However, as you can still expect to earn rental income it might make a rental property more affordable, on top of potential tax savings.
First-time investors have also been known to rentvest, which involves owning a rental property while also renting yourself - as you might still need somewhere to live. Going down this avenue could also mean you get to live in your preferred suburb while still having a foot in the property market. It’s best to crunch the numbers before hand to see how this option would fit in with your cash flow.
If you’re buying as a singular investor, you will have greater flexibility in your choice of property, but you’ll also have to rely solely on your own borrowing power. Factors such as your savings, deposit, living expenses, income and other financial commitments all contribute to your level of borrowing power.
For single buyers, your income is particularly important, as you’ll be the only party responsible for managing the investment loans as well as the other ongoing costs that come with owning a rental property.
It’s important to have knowledge regarding your individual borrowing capacity amount, as it will help you to determine the type of property and location you can afford to invest in. If you’re not sure, it’s best to speak with your financial broker about your borrowing limits.
Your purchasing power could be greatly increased if you decide to combine your resources and buy a rental investment with either family members, or a partner. It could mean the difference between being able to afford to invest in an area you find more desirable or in a higher-quality dwelling. The cost of the property could also be divided between more people, making it easier to afford constant outgoings like repairs and maintenance.
When there is more than one owner however, it is sensible to ensure a co-purchase agreement is drawn up for all responsible parties, as it outlines how a variety of situations will be dealt with. An example includes what would happen if one person decides they want to sell their share in the property.
It’s also important to have a shared opinion on how the group will collectively own the property. The two main types of property ownership include joint tenancy and Tenants in Common. Joint tenancy refers to a property being held jointly by each co-owner. Tenants in Common allows each owner to hold a specific share in the property, which may relate to the percentage of the purchase price they contributed.
The structure of ownership is an important factor when it comes to completing your tax return, as co-owners will divide the rental property’s income and expenses in line with their legal interests in the property. If you’re all joint tenants, the rent and expenses are shared equally. For a tenancy in common structure, the rent and costs are divided in the same proportions in which the property is held by each owner.
As mentioned earlier it’s never too late to start your property investment journey - so it’s definitely still possible for seniors as well. An investment property can provide you with a regular source of income through the rent you receive from tenants, the potential to early healthy long-term capital gains is also possible.
Lenders can’t discriminate against age, however, investment loans are commonly between 25 to 30 years - so if you buy in your 60’s you’ll need to factor in that you may still be paying of a rental property in your 90’s. It’s for this reason that many lenders may want to see an exit strategy, which is a plan of action showing how you’ll manage the loan repayments while retired. It’s important to note that as a senior it’s not impossible to secure an investment loan, it may just be more difficult.
If you’re looking to buy a property and wondering which loan is right for you, check out our competitive home loans or chat to one of our lending specialists to help you get into the property market.
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