There are many strategies for buying properties and investing, and the right one for you depends on your end goals.
Are you looking to get into the property market on the ground floor? Are you buying an investment now to move in to down the track? Or are you looking to build a diverse property portfolio to help you retire comfortably?
Ideally, you can have this discussion with your mortgage broker before you start buying, in order to set you down the right path: buying the right properties and using the right lenders/loan products to suit your future goals.
The first place to start is how you’re going to come up with the funds for the deposit, and there are a few different options.
Many first time purchasers are buying a property to live in, and a popular type of deposit in this instance is hard-earned savings. For an owner-occupied property, there is no tax benefit of the interest paid on your loan, so you will usually want to minimise the amount borrowed and pay the loan off as quickly as possible.
Some people buying their first investment property have already built up useable equity in their own homes. Borrowing against your owner-occupied home for the deposit for an investment property is a common way to start your investment portfolio, and can have positive tax implications over using savings as a deposit. Usually you would need to do an increase on your existing loan in order to access the funds.
Sometimes, buyers are in the enviable position of receiving a gift from family to use as the deposit for an investment or owner-occupied purchase. This usually reduces the loan amount and borrowing costs for the purchasers who then have smaller repayments and can pay the loan principal down faster, or build up equity to purchase again.
Another option available is a family guarantee. This is when family members, usually parents, have enough equity in their own homes that they can ‘lend’. This does not require borrowing against their house directly, but rather the loan on your purchase is secured by a limited value on their property as well as the new purchase. This is usually a temporary measure, and once the value of the purchased property goes up enough or the loan is paid down sufficiently, the parents’ house is released as security.
To find out which type of deposit will work best for you, give your broker a call and begin your investment journey today. If you don’t have a broker, contact Aussie and we will connect you with your local Aussie Mortgage Broker for a free appointment.
Wondering what size deposit you need? It doesn’t always take a big deposit to get into your first home, and we explain why.
Did you recently buy property? How did you come up with your deposit?