Getting financially prepared for a home loan
Buying a house or investment property in Newcastle is one of the most major, if not the largest, financial investments you will make in your lifetime. It is important to make sure you are prepared for the financial commitment involved in taking out a home loan whether it be $200,000 or $1 million plus.
Here are some tips on how to be financially prepared for a home loan.
3 Tips to being financially prepared for a home loan
1. Making the decision to buy and not rent
Unless you can pay for the property in full then you most likely need to get a home loan to pull off purchasing it.
The most important thing about preparing for a home loan is to make the decision of purchasing a property- whether it’s next year, in 2 years or 5 years. If your heart is not fully into it then you could risk losing the focus and drive to commit to the investment.
Think first if you really need a new home versus renting.
Are you better off just renting for the meantime or is the house a better investment in the long run for your money?
Also have a think about how much money you are spending on rent around Newcastle. Will the mortgage repayments on owning a property in Newcastle be similar? If so, you could well be in a good position to consider buying a home sooner than later.
It takes time to find the right property. Try and start the process early on by talking to a local Newcastle real estate agent to understand the market and identify local areas and properties of interest within your price range.
2. Know how much you can borrow
There is a difference between how much you can borrow versus how much you should borrow.
How much you can borrow depends on your debt-to-income ratio. Ideally, lenders do not want your total debt to be more than at 30% or more of your gross monthly income. As to how much you should borrow, this depends on your risk level and the type of property you dream of owning ( do you really need a 5-bedroom home or is 3- bedroom sufficient etc).
You would be best consulting with a good local mortgage broker or financial planner in Newcastle to know your numbers and work out a strategy for your short and long term financial and property goals.
3. Tax breaks and rates on investment loans
There may be tax benefits and breaks from buying an investment property in Newcastle especially with the growing number of new apartment complexes in the area.
Your accountant can tell you more about how an investment loan will affect your taxes and the implications of receiving rental income and deducting expenses like strata fees, depreciation, interest on loans, and other property maintenance expenses. Understanding these implications will allow you to plan your purchase and even the type of investment property that you may invest in.
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