Achieve more from your investment property
Paying more than 3%? Get a better rate
Watson Mortgages can help you achieve more from your investment property
Investing in property can be exciting and challenging all at once. With so many investment property loan lenders and options available on the market, we understand that it can be difficult to determine whether or not you’re getting a competitive interest rate for your new endeavour.
We’re here to tell you if you’re paying more than 3% on your investment property loan, it is likely you can get a more competitive rate.
That’s where we come in. At Watson Mortgages, we help find a competitive deals for your investment property loan in Newcastle, the Central Coast or the Hunter Region.
With more than 20 lenders to choose from, our expert mortgage brokers will do the legwork for you and present you with options to make your investment dreams an affordable reality.
Contact us for more information, or book an appointment with our Newcastle mortgage brokers today. We’ll help you find your ideal loan.
Why should I invest in property?
There’s never been a better time to invest in property. Interest rates are at a historical low, opening up the housing market to those who may have struggled to purchase before.
However, historically low interest rates mean the number of houses for sale on the market is in short supply — which is why it’s time to make a move on your investment property goals.
There is a huge range of benefits to investing in property, especially in Newcastle and the Hunter. For example:
Capital growth. The value of your investment property will grow over time, increasing your wealth as it does. With this income, you can purchase more investment properties, a new car or even a holiday.
Rental income. If the rental income from tenants covers the expenses of holding the property (like loan repayments and maintenance costs), your property will be classified as positively geared, meaning you will end up with more money in your pocket each week.
Tax benefits. Investors who purchase a brand new investment property can claim depreciation (like air conditioning and hot water systems) on their taxable income. If the property is negatively geared, you can also claim the losses as a tax deduction.
Less volatility. Investment properties can be less volatile than other investments like shares.
Physical assets. You will have an investment that you can actually see and touch and have more control of what happens to this investment.
If you have the funds available, investing in property can be a valuable asset to your own personal income. With this in mind, our mortgage brokers will provide reliable recommendations and advice around property investment, and match your investment goals with a promising home equity loan.
What kind of investment property loan is right for me?
- Variable interest rate loans. A variable interest rate will change over time as economic conditions cause the Reserve Bank of Australia (RBA) to adjust the cash rate. This is better for investors who aren’t too worried about fluctuations in their repayments and are aware of how cash flow will change based on economic conditions.
Variable interest rates come with a range of additional benefits like the ability to make additional loan repayments and redraw cash if the unexpected happens.
- Fixed interest rate loans. A fixed interest rate is better suited to investors who want certainty around their repayments and ongoing costs, so they can make budgeting easier. Many investors will choose a fixed rate so they can match their loan terms and products to the length of time they plan to own the property.
- Split-rate loans. Many investors choose to split their loans into multiple accounts so they can reap the benefits of both fixed and variable interest rates on their loans. This can help save on the interest you pay and structure your loan in a way that best suits your circumstances.
- Interest-only loans. With this loan, your repayments only cover the interest on the amount borrowed. For a set period (like five years), you pay nothing off the amount borrowed so it doesn’t reduce.
Based on your current financial situation, our mortgage brokers can provide guidance around interest rate options for you. We have your best interests at heart, and we’re committed to setting you up for success whether you’re a first-time investor or an experienced veteran of the housing market.
Contact Watson Mortgages for an obligation-free consultation
- We’ll help realise your investment goals and tailor a lending strategy based on your current situation.
- We’ll review your property valuations to ensure you have room for growth in your portfolio.
- We’ll work with your accountant or financial advisor to ensure your investment loan complements your taxation strategy.
- If required, we’ll match you with an experienced financial planner from Elliot Watson Financial Planning for more confidence and security in your investment strategy.
- We’ll provide helpful contacts prior to investing like solicitors and building inspectors.
Frequently asked questions
Where should I be looking to buy for the best return on my investment?
We’ve all heard the phrase “location, location, location” when it comes to property investment — and truly, this cannot be emphasised enough.
We recommend looking into environmental factors affecting the property value (including the proximity to the CBD), desirable neighbourhoods and popular landmarks, or even the beach — all of these elements can increase the property’s value.
In contrast, properties close to a prison, an airport or a low-socio-economic area can drive the property’s price down.
Generally speaking, we also recommend looking into areas you’re familiar with, but also have high growth, higher rental yield and low vacancy rates. This will ensure you can easily find renters who can help bring down your investment property loan in Newcastle.
It would also be valuable to do some preliminary research into proposed planning changes in the near future that may impact property prices. You want to aim for positive gearing, if possible.
What kind of property should I be looking into for the best ROI?
It’s best to look for properties with appealing features for renters like a second or third bathroom, a garage and properties near facilities like schools, shops and public transport.
We also recommend considering maintenance costs in your research. How old is the property? Does it require further renovations to be liveable? Are there any potential problems that might arise in the future? These variables will all come into choosing the right investment loan for you.
What is rental yield and why does it matter?
Rental yield is a measure of how much income your property generates as a percentage of the property’s whole value. In other words, it is how much you are making off your property when compared to how much it is worth.
There are two types of rental yield, gross and net:
- Gross yield is calculated through annual rental income and property value.
- Net yield is calculated by including all expenses involved.
Analysing the expenses and potential profits of your investment property is important before investing. It is best to be armed with as much information as possible.
The rental yield of a property will eventually determine the success of your investment and that makes it one of the most important things to understand.
If you make a high rental yield, you have more cash to spend on other investments, contribute towards emergency funds and or savings accounts. If you make a low rental yield, then you are likely to have to contribute additional funds to your investment to cover costs.
If you have a high rental yield and you would like to pay less interest on your mortgage, consider looking into an offset account when setting up your loan.
When is the best time to invest?
There’s no “one size fits all” answer to this question as it all comes down to “supply and demand”. In line with economic theory, the price of a property grows when demand increases. Properties in areas with a high population are likely to grow in value as demand grows.
Conversely, if there is an oversupply of properties in a particular area, then the prices can go down.
Be sure to do some research into areas with high or low demand and talk to your lender about interest rates. This will set you up for future success.
What additional costs do I need to consider for an investment property?
- There are a few ongoing costs involved in owning an investment property, which we will take into account when sourcing the right investment loan for you. These include:
Council and water rates
Body corporate fees
Repairs and maintenance costs.
Stamp duty (if applicable)
Searches and inspections (prior to purchase)
Registration fees (post-purchase)
Before making the jump into an investment property, we will take time to analyse your current financial situation and provide recommendations to ensure you can manage these costs while also paying off your loan.
How do I select a lender?
There are many lenders out there to choose from and we understand it can be hard to feel confident making a decision on such a big investment.
The good news is that Watson Mortgages can do this for you! Based on your current financial situation and investment goals, we can help find you a reliable lender for your investment.
With more than 20 Australian lenders to choose from, our mortgage brokers will do all the legwork for you and provide recommendations and advice at no cost to you.
Do investment loans require a deposit?
Yes. Loan deposits range between 5% and 20% depending on the lender. This provides reassurance for the lender that you are committed to your investment and have the ability to pay off your loan repayments.
If you have less than a 20% deposit, you are likely to incur Lenders’ Mortgage Insurance (LMI) on your investment property loan. This is an alternative method of providing reassurance to the lender. This can cost thousands of dollars on top of stamp duty, but we can provide recommendations and advice around LMI to ensure you get the best possible result from your investment insurance.
What are the tax implications of an investment property?
There are various tax implications that arise from owning an investment property. It is important to consider these implications and speak to your financial adviser before investing as they can have large scale financial impacts.
You are required to record all tax-deductible expenses and declare any rental income in your tax returns. According to the ATO, deductible expenses can include:
- Interest on the investment property’s loan
- Other expenses from owning an investment property.
This means that you will pay taxes on your income (including rental) minus all these expenses. It is essential to maintain thorough records of all these expenses right from the start.
The ATO recommends keeping records right from the start so you can meet tax obligations, working out how to divide income and expenses, and paying instalments towards your end of year tax liabilities.
How much can I borrow for my investment property?
This depends on a wide number of factors including your annual income (after tax), any other income, your living expenses, financial commitments and so on. Based on your current financial situation, we will provide an estimate for you in your initial appointment.
If I am running low on funds, can I redraw from my loan?
It depends on the lender and what kind of loan you have committed to i.e. variable or fixed interest rate. Variable interest rates have the advantage of allowing you to pay loan payments in advance (or when you have the funds to do so) and also allowing you to withdraw money from the loan.
However, if you’re a first-time investor, we recommend choosing a fixed rate interest loan so you have more certainty over budgeting and how much is owed on a regular basis.
What happens if I run into financial hardship?
We understand that challenges come along when you least expect them. We primarily help with seeking and obtaining an investment property loan, and how repayments are managed is up to the lender. However, we offer frequent reviews and support to ensure you can pay back your investment property loan to the best of your ability.
If you have any questions about pausing or managing your loan repayments, we’re here to help. Simply get in touch with the team from Watson Mortgages for the compassionate support you need.
What should I ask Watson Mortgages in my appointments?
We’re here to answer all your questions about property investment, obtaining an investment loan and growing your wealth. Some common questions we receive include:
– Do you offer loans from a wide range of different lenders?
– Why did you recommend this loan to me?
– What fees will I have to pay when taking out this loan?
– What features (options) come with this loan? Can you show me how they work?
– Can you show me more options including one with the lowest cost?
– What is the threshold for lenders’ mortgage insurance (LMI) and how can I avoid it?
– What information do I need to provide for the loan application?
I want to grow my portfolio. Where do I start?
When it comes to building wealth, the same rule always applies: whoever has the biggest property portfolio wins.
If you’re looking to build your property portfolio, it always helps to start by making a good investment. A portfolio of 100 or even 1,000 properties starts with one good investment — so start local, start small and work with an experienced mortgage broker who can provide guidance to build a successful property portfolio.
At Watson Mortgages, we can provide the guidance you need to build wealth. We’ll provide recommendations and advice to help you achieve your goals, whether you’re looking to own one house, five houses or 1000 apartments!
What documents do I need to have ready?
Applying for an investment property loan can be a time-consuming process. To get ahead of the game, we recommend having the basics ready to go to streamline the process. Lenders often ask for proof of your income, bank statements, ID and potentially tax returns if you are self-employed.