Most people borrow money at least once in their life to purchase a car, house or to invest in property or shares. Borrowing money to purchase growth assets – or even better growth assets that will continue to produce an income – is considered “good debt”. Good debt, such as an investment property, has the ability to increase your wealth over time and help you create a financially secure future.
However finance is harder to obtain today than it has been in recent times. Prior to the GFC banks were lending people 105% of the value of their purchase. In America, borrowers could get up to 120% and hence it was these NINJA (No Income, No Job or Assets) loans that started this global economic crisis.
Today’s borrowing capacity (up to 90%) provides lenders and borrowers with the peace of mind that the borrowers can afford to repay the loan. Anyone with a secure job, stable income and deposit, or equity can get a loan.
The residential vacancy rate in South Australia remains tight at just over 1%. There are some great investment opportunities in the property and equity markets which you might be considering this year.
If you’re concerned about getting finance for future investments, don’t be. There are some great packages available on home and investment loans currently. Lenders are rewarding borrowers who have at least 25% deposit or equity in their home/assets with lower interest rates and great features, including offset accounts.
With the Reserve Bank indicating that interest rates will rise marginally over the near term, this will potentially mean more people will choose to stay in the rental market, therefore putting more pressure on an already tight rental market. This will likely see weekly rents rise ahead of CPI over the period.
Whilst rising interest rates signals higher repayments, investors are somewhat cushioned as they get a tax deduction on the interest payable as well as some of the other expenses associated with their investments.
Also, with interest rates on the rise you might be wondering whether your home and/or investment loan(s) are competitive and still suit your needs. I always recommend you get your loans reviewed at least every two years to ensure they are still meeting your needs and more importantly to ensure you aren’t paying any more interest than you need to.
Mark Lewis is the Executive Chairman of Bernie Lewis Home Loans and Wealth Management
Filed under: Finance Tips, Home Loans & Mortgages, investment, mortgage broker, property
