The Ultimate Guide to Purchasing Your First Investment Property

dream home in hands

Buying an investment property can be a great way to grow your wealth and secure your financial future. If you are thinking of purchasing an investment property, it may seem daunting at first with all the information available online and the steps involved in getting finance, but we’re here to guide you along the process and show you the key financial steps to get you prepared.

Know your borrowing capacity

Before a bank or lender can issue you with a home loan product, they need to assess your ability to meet the financial commitments of the loan, for the entire life of the loan.  In addition, they will need to be certain you have adequate funds to finalise the purchase, and here, they will be looking at your deposit.

Your borrowing power is how much you can borrow based on your current financial situation, which is affected by your income, debts, credit cards, spending habits, credit rating and deposit.

Use our borrowing power calculator on the Launch Finance website to get an indication of how much you may be able to borrow.*

Have your deposit ready

Once you know your borrowing capacity, it’s time to ensure you have an adequate deposit.

If you already own property, you can use the equity in that property as additional security for the investment property in lieu of a cash deposit.  Equity is the difference between the current value of your home and how much you owe on it.

The Loan-To-Value Ratio (LVR) is the amount you’re borrowing, represented as a percentage of the value of the property you’re buying. Therefore, the bigger deposit you have for your investment property, the lower the LVR will be.  This means the risk to the bank or lender is lower. Generally, when the LVR is lower than 80%, your bank or lender will not charge lenders mortgage insurance (LMI), which can be a huge saving for you.

Having trouble saving for your deposit? Launch Finance has a comprehensive budget planner that helps control your discretionary spending so you know where your money is going and where you can cut expenses. Simply send us an email with the subject line ‘budget planner’ to [email protected] and we will send you the free budget planner!

Determine which loan structure will suit you

Now that you know your borrowing capacity and have your deposit sorted, it’s time to determine what type of loan to opt for.

The type of loan and repayments schedule should be determined based on what best suits your financial situation. You should shop around for a competitive home loan with low interest rates, and additional features that might suit your circumstances (for example, redraw, 100% offset and fixed rate rules).  Remember, check the fine print for any additional fees.

It’s Time to Get Pre-Approved!

Getting a loan pre-approval helps you know with confidence how much you can borrow and what your spend limit is.  That way, you’ll have confidence when looking for a house within that budget.

Find a Property

Now you have your finances in order, you are ready for the fun part: finding your investment property! Speak to real estate agents, go to home opens, determine the location and property features based on who you would like to move in.

Launch Finance can help you at every stage, providing financial assistance and guidance throughout. Our expert brokers can answer any queries you have and tailor the process specifically for you! Contact us by calling (08) 9367 4222 or email [email protected].

Stay tuned for our mini video series as we’ll be going into detail on the financial steps in purchasing your first investment property. Watch this space!

*  The information provided by the Borrowing Power calculator is indicative only and does not constitute professional advice.  The calculator provides you with an estimate of how much a lender may be willing to lend to you based on the information you have entered.  The calculations should not be relied upon for the purposes of entering into any financial commitment.

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