11 common property investment finance mistakes to avoid

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Navigating the rocky seas of property investment finance can be a challenging task for home buyers and investors.

And it’s made even more difficult by all of the misconceptions about home loans that are out in the ether.

If you get your property investment financing wrong, it can cost you thousands, sometimes tens of thousands of dollars over the life of your loan.

Property Investment

Get it right though and the benefits can be enormous, including saving thousands on interest repayments and excessive fees and charges.

For real estate investors, structuring your finance correctly is even more critical as it can mean the difference between building a lucrative, wealth-generating property portfolio and never progressing beyond the first one or two investments.

If you think about it, property investing is a game of finance with some real estate thrown in the middle

So how do you make sure you end up with the right type of property investment or home loan finance and come out on top?

Here are 11 traps that can snare borrowers when seeking the best mortgage product and how to make sure you don’t get caught out.

1. Caught up in the razzle-dazzle of the lowest rate

Given that the most talked about topic when it comes to home loans are interest rates, it’s not surprising that getting the best rate often becomes the sole focus of home buyers and investors.

Especially today where interest rates are rising from their historic lows.

But what might seem like a good deal can often come with strings attached in the form of higher fees and ongoing costs or less flexibility.

Then of course there are low honeymoon rates that some banks offer, which roll over after a year or two and start to look a lot less attractive.

Get it right

Avoid the temptation of a lower headline rate by working out exactly what you need from a finance product and the features that will best suit your requirements now and in the future.

If you’re a home buyer, you might want some of the bells and whistles to help with your day-to-day finances, such as credit cards attached to your mortgage account.

As an investor, you’ll need flexibility when it comes to refinancing in order to add to your portfolio and the potential benefits of extras such as Line of Credit facilities.

It’s all about planning a sound, overall financial strategy.

2. Getting too fixed on your loan 

When interest rates are on the rise, it’s common for borrowers to panic and goes about fixing their loans in an attempt to avoid skyrocketing repayments.

The problem is, that they’ve often left their charge too late and missed out on the best deals.

Loan

Fixed rates started rising at the end of 2021 and now they seem to have already most future rate rises built in, so when you do the sums, it becomes clear that a fixed rate will generally cost you more in interest than a variable one over the life of your loan.

Then there are the often high exit fees you’ll be forced to pay should you decide to refinance or terminate your loan prior to the end of the fixed-rate period.

Again, it all comes back to how much flexibility you want or need.

Get it right

A fixed-rate mortgage can be beneficial if you prefer the certainty of knowing what your monthly repayments will be.

This can be true for home buyers as well as investors, with the latter sometimes wanting to ensure they can cover any out-of-pocket expenses on their investment without the risk of rising rates pushing their mortgage repayments beyond what they can reasonably afford.

But if you need flexibility or want to take advantage of the best going rate, you should carefully assess whether fixing your loan is the best scenario for your requirements.

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