While it’s hard to predict what is going on in the property market my view is still that property is a great investment and now is a fabulous time to buy. It’s easier again to get finance approved again (thank goodness). The banks are lending up to 97% of the value of the property for a purchase and up to 90% for a refinance/equity tap loan.
Property hasn’t had the same rollercoaster ride that most superannuation funds have experienced either so in my view it makes property a more solid investment or the banks would appear to agree. If you are going to buy shares you are lucky to get a loan for 50% of the value yet buying for report they will almost lend you the entire amount!
One of the key reasons for previous property growth is demand. At the moment it is very very hard to get a rental property in most areas. In my area (Port Stephens) it is not unusual for 30 people to turn up at an open home for a rental property. You are usually paying more than 5% of the value of a property for rent so therefore it isn’t going to cost you much more to buy than it is to rent. Some of the lenders have 2 year fixed interest rates at the moment for 4.99% pa. Our population is also growing so this also increases demand. With these things in mind I feel the property market will start to grow again in the not too distant future.
Buying To Live In or Invest?
If you are renting a home I believe you are best to buy to live in – why pay off someone else’s mortgage?
If you already have your own home and you have some equity then it’s possibly a good time to look at buying an investment property. In most cases now the tenant and the tax man help to pay off the property with little input required from you personally or financially. It’s a set and forget investment.
It’s very important to do your research on “what and where” to buy. Whenever I am buying I spend quite a long time doing research into the area. I look at what properties are currently on the market, properties that have sold recently in the area, study the local real estate guide and online real estate for sale sites.
How Much Money Do I Need?
When you buy a property you need enough to pay at least a 5% deposit plus other costs such as stamp duty, legal fees, solicitor fees, pest inspection, building inspection and other fees. I usually suggest to my clients that they allow at least 13% of the purchase price in total to cover everything. That will mean that you will have SOME money left over after the purchase. I think that’s sensible as you don’t want to use every single cent that you have.
Most mortgage brokers are able to send you a do it yourself link that you can use to input your information and then they will be able to work out your borrowing capacity quite quickly so you know if you are in a position to be able to buy something or not within a few minutes. Why not give that a try and step one and see what you are able to do.