Using advanced mortgage broking techniques for property investing can not only help you make hundreds of thousands of dollars more, it can also help you do it more safely.
The lending environment is a maze of first, second and even third-tier lenders who all operate very differently. When it comes to lending for investment property, there are some major areas that vary between lenders including lender policy and valuations.
While interest rates and fees are important, it’s far more important to get these other aspects optimised first, then push the lender for the lowest interest rates and fees they can offer, both upfront and throughout the life of the loan.
Of course, you won’t be able to do this alone. An experienced Mortgage Broker who specialises in property investment finance is your best bet in ensuring you don’t make costly mistakes along the way.
Consider these three critical areas when financing your investment property:
1. Property valuations
Property valuations can vary by 10 to 30 per cent on the same property. A higher valuation can give you access to more equity to invest in another property and keep a cash buffer to help reduce risk.
Imagine you were able to access just 10 per cent more equity on a $2M property? This would give you an additional $200,000. If you used $150,000 as deposit and costs towards a $600,000 cash flow positive investment property (and kept $50,000 as a cash reserve buffer) and this property grew by just 6 percent per annum, that’s $36,000 per year in growth you may not have realised without a better valuation.
2. Lender policy
The different ways lenders assess your borrowing capacity can be the difference between one lender approving $500,000, and another $1,000,000, especially if you already own more than one property with debt and use more than one lender strategically.
A higher valuation from the lenders who can offer better borrowing capacity means you can invest in more property, more safely, using some of the extra borrowings as a cash reserve buffer.3. 3. 3.
3. Loan structure
The wrong loan structure could also cost hundreds of thousands of dollars over five to ten years. Some common and potentially costly pitfalls include not having loan portability, cross collateralising loans and incorrect ownership structure.
A final word of advice
It’s worth ensuring that your advisors are talking to each other and working towards the same objectives. For example, you don’t want your accountant looking only at short term goals such as this year’s tax return, to the detriment of the long term wealth creation masterplan. Use these individuals as an advisory board to keep your goals on track and optimise your financial position, safely.
Richard Sheppard is the Managing Director and Chief Property Wealth Planner of inSynergy Property Wealth Advisory. Phone 1300 425 595 for a free chat with an advisor.