Over the past 20 years, Australia's banking and finance industry has experienced considerable change. Aside from changes in regulations when it comes to lending, the big four banks previously providing the vast majority of financing, have lost quite a bit of this market share with numerous other banks and alternative finance lenders entering the market.
The culture of simply going to your family's banker is changing as financing options become more transparent, causing consumers to become savvier when choosing a lender. Wisebuy Investment Group is committed to helping everyday Australians grow wealth through property. Founded in 2015 by multiple award-winning mortgage broker Brad East, Wisebuy's primary goal is to deliver an unparalleled customer service experience and provide exceptional and ongoing home loan advice. Below Brad outlines a few important factors to explore when determining the right lender for you.
Outline an investment strategy.
How do you plan to make money from your investment property? Understanding your investment strategy is very important as it can influence the type of loan you need. There are 3 ways to make money from an investment property; rental income, capital growth over time, and negative gearing (reducing the amount of tax you pay). Consider which of these is most important to you.
Understand different types of loans available.
Signing a home loan means committing yourself to paying off long-term debt. When looking for a great deal on a loan, the interest rate really matters as even a small difference adds up over your loan term. Similarly, it's important to understand your repayments. Principal and interest refer to your repayments covering both the amount you borrow plus interest. Interest-only refers to your repayments only covering the loan's interest for up to 5 years. At the end of the interest-only term, the loan usually reverts to principal and interest repayments, or if needed you can refinance to another interest-only loan. Something to note here is that Interest-only loans allow you to maximize your tax-deductible interest expense.
Use your equity.
Coming up with a 20% deposit upfront is no easy feat. Most often people put up 10% but are then required to pay lender's mortgage insurance, which can be quite expensive over time. If you are only able to put down a 10% deposit, then a great way to negate having to pay lender's insurance is to utilize your equity. If you are already a homeowner, you can use the equity that you have in your home to help you secure an investment property loan.
Look at loan features.
Different loans will have different features, such as offset accounts or redraw facilities. It's important to choose a loan that has the features you need and can make the most out of. You may be charged fees for some loan features, but if the benefit of a feature outweighs its cost, then it may be worthwhile.
Talk to a mortgage broker.
I cannot stress this final point enough – talk to a mortgage broker! Brokers are experts when it comes to finance and loans, and nothing you learn on Google can beat that. Make the most of a broker's expertise by talking to them in depth about the above points as well as any other questions that are important to you. You have nothing to lose here because Mortgage brokers help borrowers to arrange loans with lenders –they work for borrowers, not lenders! Talking to a broker can help save you both a lot of time and money in the long run.
Get the most out of your mortgage by following Brad's tips to finding the right lender. If you would like to speak to Brad or one of his team about choosing the right loan for you, click here.
