What’s the deal?
When you’re looking at potential investment properties, you need to look very carefully at the numbers – since investment properties are all about the numbers.
When you crunch the numbers on a property with an interest rate of 7% as opposed to 5% it may be the difference between a positively (or at least neutrally-geared) property and a negatively-geared property. Depending on your strategy, a negatively-geared property may not be a problem, but keep in mind if that 5% interest rate goes up to 7% what will that do to your numbers? It’s probably a wise move to run the numbers based on 7% and if it still works for you and then the interest rate goes down to 5% a nice win-win.
Lock it or leave it?
There are some great fixed rate mortgage offers around, with three-year rates around the 5% mark. They look great, but only if you are planning on holding the property. What if you break the loan early, what are the penalties? Penalties can run up into the tens of thousands of dollars! So think long and hard about if it’s worth it.
Also keep in mind what happens if want to pay more than the minimum mortgage repayment Most fixed loans are not flexible, so keep this in mind too, before you commit.
Only Fools Rush in
I know when you want to buy, you want to buy NOW and don’t want to wait around. But you’ll be a fool if you don’t take it slow and run the numbers fully. There will always be a ‘deal of the century’, so be patient if you miss out.
Above all else…
Talk to the experts, get your team involved and let them help you make the right decisions. Without your team you can make some very, very expensive mistakes.
Have you been dazzled by the low-interest rates? What happened?