Golden rule for all property investors before bidding

ANTHONY KEANE writes, with out comments:

Property investment has surged as the housing boom puts dollar signs in the eyes of would-be landlords, and new numbers tell the story. The value of investment loans has climbed 69 per cent in a year, according to fresh Australian Bureau of Statistics data, while the nation’s average mortgage size rose 17 per cent annually to almost

$636,000. Mortgage brokers say new and existing investors should sort out their finances first before bidding, and have shared some important tips when applying for an investment loan.

Rebecca Jarrett-Dalton, founder of mortgage broker Two Red Shoes, says before approaching lenders make sure you have a clean credit history, understand your expenses, and have paid off unnecessary debt – especially “bad” debts that are not tax deductible. “There’s a huge benefit in offloading any unnecessary debt – a $10,000 credit card limit can mean an $80,000 reduction in borrowing capacity,” Jarrett-Dalton says.

“Make sure you are meeting your existing repayments. “Your credit history may include up to 24 months of repayment

history, and many lenders give this a lot of credence.” Jarrett-Dalton says getting preapproval for an investment loan is important. She says people often assume loans will be approved if the repayments are covered by the rent “but the reality is the way lenders assess the rent is very different and you may find yourself falling short”.

Digital-first mortgage broker Finspo’s chief executive officer, Angus Gilfillan, says the surge in investment lending has come at the expense of first home buyers, whose lodgements are down 24 per cent. “The data supports the view that first home buyers are being priced out of the market by investors over the last 12 months,” he says. Gilfillan says investors have been increasingly looking further afield into regional and interstate areas “where there might be attractive yields or potential for capital growth”. He says investors should know their buying power and optimal loan structure before bidding, and should have an “expert in your corner”.