Changes to home loan lending with restrictions being brought in to limit investor buying has resulted in the Australian property market slowing down. This means that if you’re looking to buy a home or an investment in 2016 that you need to be more astute.
However, this doesn’t mean that home buying should be put into the too hard basket. What it does mean though is that you need to be savvy and conduct sound research before you buy. As an old adage says, “only fools rush in.” So rather than rushing in to buy a new home or investment property do your homework and seek advice from professionals.
Despite the Australian Prudential Regulation Authority’s (APRA’s) clampdown, investors are still able to borrow to buy property, and investment loans are still very affordable. In fact, historically speaking, investment loans, along with home loans, still have the lowest interest rates in over 60 years.
So to make a sound buying decision while the Australian property market goes through a period of readjustment, it is suggested that buyers seek advice and allow themselves to be guided by expert knowledge. This will enable them to buy wisely.
The Best Ways to Navigate the Property Market in 2016
• Research the market, before buying – It’s vital that you do market research and compare areas when investing, as well as property types. If you’re investing interstate, then look at sales data and rental return history, property values and other demographics. Most research can be conducted online, just make sure you use reputable websites.
• Shop around for the best loan – Rather than visiting the same lender you’ve been using for years, research home loans and compare rates and features. The lending industry is currently a very competitive market, so you can shop around to find the best rates, which can save you thousands in the long-run. If you’re not sure how to compare lenders, then contact a mortgage broker or use online rate comparison services.
• Negotiate a better deal – When it comes to buying a home it’s all about getting the best price, this will save you on stamp duty and interest. So don’t be afraid to haggle on the purchase price of a property or on your home loan interest rate. Often the asking price, in both instances, is higher than is willing to be accepted.
• Think creatively – By thinking smart you often get yourself ahead financially, and outsmart any competition. One way you can do this is by rent-vesting when you buy an investment property. This means that you buy and investment property and rent it out, while you rent another property yourself. This then allows you to live in a location that you couldn’t afford to buy in, and enables you to buy in a more affordable location.
The benefits of rent-vesting are that you are able to get into the property market, and your money is working for you. You can also share the costs of the investment with other people, if you decide to invest with family or friends. This will allow you to reduce your level of financial commitment and will also increase your borrowing capacity.
But before you enter into any deal or agreement, make sure you have a lawyer draw-up your contract. Never make a verbal or handshake agreement on large assets such as homes.
• Use a strategy – Property investment isn’t short-term and it should be viewed as an important step in your financial journey. Investing wisely when you’re young can allow you to live comfortably in retirement.
As a property investor it is recommended that you review your property portfolio annually. It is also vital that before you commit to buying more property that you are able to manage your mortgage commitments without putting yourself under any financial pressure or duress.
• Always seek professional advice – Property investing is not regulated by the Australian Securities and Investments Commission (ASIC) as other Australian investments are. Therefore, it’s important for property buyers to be wary of unscrupulous operators that may be seeking to make financial gains. To avoid making poor property investment decisions, it is advisable that you seek advice from a financial advisor, with formal qualifications, before you sign any contract.
• Pay off your debt faster – Paying off your investment property quicker can allow you to have more money to invest elsewhere. This can be as simple as changing your monthly repayments to weekly so that you pay more off in a shorter space of time. In addition, you can pay more than the minimum repayments. Paying off an extra $10, $20 or $30 weekly can shave thousands off your interest over the term of your loan. Financial advisors also recommend leaving your repayments the same even if interest rates fall, this will allow you to pay more off your home loan.
Lastly, if you don’t have an offset account, then now is the time to look into one. Offset accounts will save you in interest and will reduce your home loan term over time. Of course, this is providing that you leave a base amount of funds in your offset account monthly.
Want to know more about home loans? Then contact eChoice and find the right home loan for YOU today.