Learn to prepare your finances to invest in property

When you’ve decided that it’s time to purchase an investment property, it’s time to make a plan to achieve that goal!

Your first step is to organise your finances (not something most of us enjoy), so let’s stop avoiding it and get started!

Find out your credit score

Assuming you need to apply for a mortgage, then you will need a decent credit rating. There are any number of free tools that you can use to check out your score (a quick online search will point you in the right direction), but if you find that it needs improving then we have some amazing partners who can provide advice. Click here to find out more about improving your score.

Pay off your debt

When discussing finance, we need to consider one of the most important aspects of preparing for home ownership: Debt payback.  Because when it comes to calculating your debt-to-income (DTI) ratio, your ability to repay any additional debt is a crucial consideration for any lender.

If your DTI isn’t looking pretty, then you may like to learn more about the debt snowball method. This is a debt-reduction strategy across multiple fronts, where you aim to pay off the smallest balances first, successfully wiping out debts one by one, while ensuring that you continue to make payments on other debts.

However, while most lenders will generally qualify someone with a debt-to-income ratio of around 43 per cent, some lenders may also be willing to fund the loan if the ratio is lower. If you need help with navigating the maze of mortgage options in the market today, just ask us about which of our partners can help you to find the best solution.

Save for a deposit 

If you want to avoid lender’s mortgage insurance (LMI), you’ll need to save 20 per cent of the purchase price. This means if you’re starting from scratch then saving up for a deposit could take several years…which is why buyers often opt to borrow more and pay for insurance, speeding up their time to purchase. Regardless of which option you settle on, it is critical to have a healthy savings history and to put aside money for the additional expenses throughout the purchase process. 

Plan for the “hidden” costs of purchasing a property 

Don’t be caught off guard by the fees and charges you’ll face in the lead up to taking possession of your brand new property! As a general guide allow for roughly 5 per cent of the purchase price. This might seem like a lot, but it will give you a ballpark figure for how much money you’ll comfortably need for:

  • Mortgage insurance
  • Stamp duty
  • Building and pest inspections
  • Transfer fees
  • Council and water rates
  • Conveyancing and legal fees
  • Moving costs
  • Renovations and repairs

And if you’re planning on renting out the property:

  • Landlord insurance
  • Vacancy downtime (if you need to find a tenant)
  • Advertising fees to find a tenant

Establish a budget 

All of the above is the very best reason for preparing a budget early on in the process, and sticking to it! This budget will also give you an idea as to how your monthly budget will shape up once you’ve purchased the property. To prepare yourself take a look at this range of handy calculators developed by one of our trusted partners. 

What else can you do? 

Don’t go it alone! Put up your hand, pick up the phone, ask for help and advice whenever you need assistance! The team at One Haven are here to help you throughout the property purchase process from start to finish. And it’s vital to establish a finance plan early so that you’re prepared for the inevitable hiccups that occur throughout the journey. We’re always here to help, so contact us to discuss your options today.