Australia's growing economy and rising population means that property is likely to continue being a good long-term investment. But a range of present conditions, in particular changes to the way credit is assessed, has property buyers and consumers are sitting on their wallets, which means there will likely be subdued demand for the foreseeable future.
Recently we've seen rising costs of wholesale funding requiring several major lenders to raise rates. As attractive as property is, investors will never be able to prevent all risks from changes to things like interest rates but be proactive and there are some precautions you can take to ensure you make the most of your investment.
1 review your current loan
Depending on your position, a review of your finances could slice hundreds of dollars in monthly repayments from your current loans.
Current restrictions in lending is affecting some lenders differently than others. Those less affected by these restrictions are chasing new mortgage business and for the right kind of application, are offering generous discounts. In addition to this some lenders are offering introductory rates and cash incentives
Property investors have more than six hundred fixed rate and nearly two hundred variable rate loans on offer, so there's a good chance one will work for you.
2 Be loan ready
In the current lending environment, this is the most important thing you can do. Many applicants that were able to borrow with relative ease ten or twelve months ago now find themselves unable to access finance because of tighter lending policy being forced on banks by the regulator, APRA.
Before you head off to see a bank or your mortgage broker there's a couple of things you should do.
Many lenders will ask you to confirm your other debt obligations like credit cards and personal loans by supplying statements and transaction histories. It's a good idea to make sure your loan doesn't have any late payments showing and your credit card doesn't show any unusual or regular undeclared monthly commitments. These are red lights to a credit assessor.
Most people think lots a credit cards with big limits are a sign of good credit, and for many people they are. But for most of us those large, unused credit limits will just get in the way of your borrowing capacity. Get rid of cards you're not using or reduce limits before you apply for new loans or refinancing.
3 Review your rent strategy
Replacing a tenant is an expensive exercise relative to the rent you receive. While it's important to maximise your weekly rental don't squeeze the tenant so much that they look elsewhere. The loss of two or three weeks rent and the cost of advertising is a lot greater than the extra twenty dollars you tried to get.
If you'd like some help reviewing your property investment loans or other lending, give Paul Cunningham at Etairos Finance a call on 1300 55 22 30 or 0466 886 252