Thinking about buying your second investment property in Australia? Contemplating this means that you’ve already managed to successfully pay your dues on time and have a healthy financial reserve waiting to be invested. Before you commit, there are a couple of important things to do and consider before starting your house hunt.
1. Ensure that you have financial strength
What this means is that you must be sure that you can comfortably apply and pay for another property. You shouldn’t consider purchasing a second property if your job security is in question or if financial goals are higher on your list of priorities. Is your current financial house in order? Is your retirement savings in good shape? Will you be able to afford your kid’s school at the same time? You should also boost your financial safety net. Six months to a year’s worth of living expenses, which includes the new housing payment is a good starting point. Since banks are continuously tightening their lending practices because of the housing crisis, you need to have a great credit rating to be able to secure the lowest rates as well as keep debt levels under control. Many lenders want your debt to be no more than 36 per cent of your current monthly pre-tax income, which includes both home payments. You should also have at least 20 per cent down payment saved to reduce the monthly expense of private mortgage insurance – this money can be added to the down payment.
2. Can you afford two mortgages
As for mortgage financing, you need to qualify for another home mortgage, which will be on top of any mortgage debt on your current/primary home. Generally, you will need to make a down payment of around 10 to 20 per cent, the latter of which as stated is the best option. You also need to meet credit standards and debt-to-income requirements as well as give documents for asset and income verification. Also, if you have a healthy relationship with your mortgage lender for your primary residence, this can be a good place to begin your quest for a second-home mortgage. If you are looking to tap into home equity you have made up on your primary residence to help pay for your second home, keep in mind that if you want that equity for an emergency, it’s possible that you may not be able to access it.
3. Consider the tax implications
Consider the implications of your new investment purchase. If you will use the second home as your true home, you could get a deduction for mortgage interest as well as property taxes, the same way with your first-home mortgage.
4. Invest in growth neighbourhoods
Growth neighbourhoods are areas that have good future resale value or those that are great to live in because of booming industry or commercial areas near it. Aurora houses for sale in Epping, Victoria is a good example of this. The location is only 25 kilometres from the CBD with complete transport ease, two town centres, great schools, and green environment to boot.
There you have it. Be sure to be exhaustive with your research, ensure that you’re financially capable and lastly, consider your family’s unique lifestyle before finalising your decision. Best of luck!