4 Critical Finance Mistakes Made by Property Investors
With the average size loan for a first home buyer in Australia is $324,300, and with this amount rising by $6000 between August and September 2016, it is clear that applying for a loan and receiving approval in a timely manner is imperative. In today’s market there are more finance options available than ever before, and with vast amounts of information easily accessible online, choosing a loan should be simple.
For many new property investors this process is often considered one of the most complicated parts of investing.
To help new property investors make the right decision below as featured in the Domain section on the news; the four most common finance mistakes first timers make, and how to avoid them:
1. Going on spending sprees. Banks only have a limited amount of funds to allocate to loans, and therefore need to ensure they only approve those who will be able to pay them back. Many new investors are applying for loans of 90% and upwards, and given this high level of debt, any erratic purchases or trends will likely lead to the loan being rejected.
2. Forgetting to pay bills. Forgetting to pay one phone or credit card bill might not seem like an issue, but any missed payments places a default against a person’s record, which is a significant red flag when being assessed by banks and insurers. If a person is aware of any defaults against their name it’s crucial to be honest and address the reasons in an application; otherwise the person is deemed too untrustworthy.
3. Thinking brokers offer higher interest rates. It’s an age old misconception that brokers are more expensive than going directly through the banks because they add on a commission fee. Instead, brokers make a profit from the commission they receive from the bank once a client’s loan has been approved. This means that from the applicant’s perspective, a broker provides an unbiased expert opinion, free of charge.
4. Fixing Interest rates at the wrong time. Most people fix rates when the rates are already on the way up instead of when rates are historically low. If an investor isn’t planning on selling the property, they should consider and weigh up the options for fixing the interest rates for the long term. Five year fixed rates are currently at a historic low at 3.99% with CBA.
“It’s getting harder to receive approval on loans, and with the average new property investor applying for a loan of 90 per cent and upwards, it’s crucial they make the best choices for their specific situation, or they risk missing out on getting a kick-start to their investment portfolio,”
At DDP we have done over a 1000 property deals and would love to chat to you regarding your Finance options. Click here to book in for a free consultation with a DDP Property Finance Expert to ensure you have the the correct products for one of your most important investment.
On a closing note the holiday season is around the corner, I like to wish you Happy Holidays! Take the time to reflect on your achievements for the past year in 2016 and importantlyy to write down your goals that you like achieved in 2017.
Would love to work you.