2013 presents a number of enticing opportunities for property investment – particularly if you plan on riding the upwards-trending wave that is presenting itself to home owners. If considering your first purchase (or secondary investment), it is important to ensure your borrowing capacity is optimum in order to allow you to make the best possible purchase. Post-GFC there has been increased legislation and caution from banking institutions in relation to lending capacity. These precautions are in place to protect the strength of own national economy, and to ensure we are borrowing responsibly. It is worth noting, however, that there are some institutions that will lend more or less to a potential mortgagee with identical credentials, which makes taking time to organize your finance with a broker the way to go. Today’s Chisholm & Gamon blog is a guide to optimizing your borrowing capacity and enhancing cash flow.
Keeping your paperwork up to date and in order may be just the edge you need to have your loan application approved. It is necessary to have water-tight financial records to impress a lender, so get your tax returns completed on time and keep your financial records up to date. Should you be a sole trader or self-employed, your ability to demonstrate that you run an organized business will heighten the bank’s confidence in your ability to repay the loan.
Cleaning up any credit card debt is very important when aiming to maximize your borrowing capacity. Banks will calculate your capacity to repay the loan based on you income, taking into account other mortgages and loans you will need to service. Credit cards (even ones with low balances) and personal loans are best kept to a minimum, as they can adversely affect your repayment capacity.
SEARCH FOR THE RIGHT LOAN
Many banks offer a number of attractive added features with their loans. It is imperative to consider that for every credit card and line of credit offered, less ‘real’ money will be loaned. Be circumspect and look for the professional package that suits you and your lifestyle. Your main aim should be to secure the lowest interest rate possible, while also attempting to lower the rates on other mortgages to free extra cash flow. Your mortgage broker will advise you on the best offerings and ‘plan of attack’.
EXTEND THE LIFE OF YOUR LOAN
Many investors are now opting for 30 year loans instead of the former norm of 25. The longer a period of time you have to pay back your mortgage means lower repayments, freeing up more money for living or additional assets. You could also opt to make interest-only repayments on an investment property for a limited period of time. This approach can be useful for short-term mortgage holding or owner-builders looking to maximize their cash flow.
Contact Daniel Hustwaite at Aqua Financial Services for expert advice
0408 985 611