Answering our most frequently asked finance related questions. Discussing SMSF property, offset accounts, buying an investment property, and more!
It’s been a while since we last bought you some of our frequently asked finance related questions. At REIF we receive a lot of questions from our social audience and clients about how to best manage their mortgage and other loan commitments. With a recent influx of questions in the current market, we thought that we’d share them.
If you have any questions for our team to answer relating to finance, mortgages, and investment properties, please feel free to reach out. We’d be more than happy to assist your enquiry.
Q: How do I go about buying an investment property for the first time if I own a business?
A: If you’re looking to get a mortgage when you’re self-employed there are a few extra hurdles to face. While lenders offer a different approach to self-employed individuals who’re looking at buying an investment property, some things that you can do include:
Prove your ability to save. Even during testing times. Generally, banks look more favorably upon you if you can prove your ability to save
Keep a 12-month paper trail of all your personal and business statements. This includes tax returns, notice of assessment, profit and loss statements, and balance sheets. Your ABN needs to have been registered for at least two years
Be up-front with your potential lender
Pay off outstanding debt
Have a war chest
Regularly review your credit score and work towards improving it (if unsatisfactory)
More importantly, consult a finance broker or finance specialist. These experts are well equipped to support self-employed individuals with navigating the vast selection of loan product offerings on the market. They can also help with lodging loan documents to the lenders for you.
To learn more about accessing finance when you’re self-employed, we recommend that you check out this article we wrote earlier.
Q: What factors can influence my borrowing capacity?
A: There are numerous factors that can influence your borrowing capacity. Banks will generally assess your borrowing capacity based on the number of people you wish to put on the loan, if you have dependents, where you want to buy, or whether the property will be an investment or owner-occupied. Other factors that they’ll consider include:
Your household income
Your expenses
Your credit history
Your deposit and the value of the property you’re looking to buy
Any other assets you own
The loan term, type of mortgage loan, and how often you’ll make repayments
If you need assistance with determining your borrowing capacity, it’s suggested you consult a finance broker before going straight to the bank. The more enquiries that you make with a bank can be marked against your credit score.
Q: When buying an SMSF property, can you later leverage it to buy additional investment properties?
A: Yes. One of the greatest benefits about buying an SMSF property is that you have the power to leverage it. Any capital growth and rental income incurred from your SMSF property can be borrowed against to fund further property within your superannuation.
To learn more about using your SMSF when buying an investment property, we recommend reading this earlier article.
Q: I have an offset account linked to my home loan. What can I do to reduce the payable interest on it?
A: An offset account is a great feature that can help you to reduce the interest on your mortgage, over a period. You can further reduce your payable interest against your home loan by increasing the savings within the offset. This can be accomplished by:
Allocating a percentage of your rental income straight into your offset account
Allocating a percentage of your earned income into your offset account
Avoid touching it for spending
Depositing your annual tax return into your offset account
The most important thing that you can do is consult a finance broker. They’re specialized in finance structuring and may even be able to review your lending to source more suitable rates on the market for you.
Q: What can you do to pay down debt quicker when applying for a mortgage?
A: There are a few things that you can do to pay down your bad debt quicker. Especially when you’re wanting to buy a property. You can utilize bonuses to pay off debt, have plans in place, make repayments on time, consolidate debt, make extra repayments where necessary, and prioritize your finances.
We recommend that you consult an expert such as a financial adviser. While we aren’t financial advisers, we have connections that can support you.
For more information
If you’re in need of support with accessing finance, please feel free to reach out. Our team of finance brokers/ finance specialists are here to help. To book an appointment, click the button below.
