How much can I afford to spend on an investment property?
There are several costs involved in purchasing an investment property and it's a good idea to understand these costs so you can accurately plan your investment.
How much the bank tells you and how much you can afford to purchase are two different numbers.
You'll generally need about 5-10% deposit for an investment property purchase. If you already have property, you might be able to use your equity to cover more of the deposit. The lending criteria for deposits differs between lenders and a Loan Market mortgage broker will help you identify which lender will best suit your needs.
In addition to your deposit, you will need to consider these purchasing costs:
- Loan application fee
- Valuation fees
- Stamp duty and other statutory government charges
- Conveyancing and legal fees
- Lenders Mortgage Insurance (LMI) if you're borrowing more than 80% of the property value.
Budgeting is important
Setting up a budget that considered cash flows, expenses, fees and maintenance will lead to easier and more educated decisions when it came to picking the right investment property.