How Do I Choose the Right Loan?
Don’t let anyone make the decision for you as to what loan you want to go with. Equip yourself with the knowledge from more than one person. Work out what is the right loan for you. Ask all the stupid questions you can and find a strategy that resonates with you.
When deciding what type of loan:
1. What loan structure would best fit your situation: Interest only or Principle and Interest, Fixed or Variable, 80% or 90% Lending.
2. What are the interests rate for each structure? Evaluate the differences?
3. Which loan will allow you to keep the most cash in your account? And is this best practice for you?
4. What facilities does the loan offer: Offset account, Line of credit, Flexibility to make changes, Support, Other services
5. What is the tax effectiveness of the loan structure? You will also need to have this conversation with your accountant.
When borrowing, what you need to consider:
1. How long will you hold the property for?
2. What are your intentions with the property: Buy and Hold, Sell in 5 years, Never sell, Flip, Renovate, Add additional revenue stream – E.g. Granny Flat, Develop
3. What is your borrowing capacity?
4. What is the amount of deposit required at the price point you are targeting?
5. What is your regular income?
6. How long have you been working in your current job?
7. The risk considerations for the lender, for example, current debts you are holding, your credit rating, expense levels, dependents, credit card limits, university fees, etc.
If this feels a bit much, particularly if it’s your first time round, then make sure you work with people you trust. It can become technical, but don’t let this dishearten you. Don’t be afraid to ask every question possible, during this process. Also tap into your intuition to get a read on what feels right for you. Particularly when it comes to working with people who you will need to trust so you can continue to make progress.