Still can’t decide whether you should buy your first property as a home or as an investment property? Most first-time buyers have been there and succeeded with their choice. In this article, we’ll tackle some issues that’ll help you make up your mind.
Property prices are increasing in Australia’s biggest capital cities, and the urge to purchase a property is now stronger than ever. If you’re looking to buy your first property, you need to decide if you want to use it as your home or as a rental property. Either decision will impact everything else down the line.
It’s a hard decision, to say the least. While you want the security of living in your own home, you also want to start building your property portfolio to secure your retirement.
Let’s assess the upsides and downsides to each option.
Upsides of buying your home first
- You can get a first home owner grant. While more restrictions are applied, FHOG is still available to first home buyers and helps you in a big way if you qualify.
- You are tax-exempted when you sell. If you live at your purchased property for 12 months, you won’t need to pay capital gains tax when you sell, regardless of the value, it has grown during that time.
- Easier mortgage. Lenders are often more willing to lend to borrowers who are buying their homes, and through more added benefits from Premium Variable Home Loan, you get to enjoy more benefits and flexibility.
Upsides of buying an investment property first
- Continuous cash flow. You can gain regular income that’ll help you manage your cash flow better. Tenants are essentially paying your mortgage, plus the house is still yours at the end of the day.
- Lower repayments. Lenders often let you pay only the interest on your mortgage for a number of years, making it easier to hold your property.
- Potential to borrow more. You can potentially get more financing from banks, thanks to the rental income from the investment property. Most lenders take about 60% of the rental income as proportion and for calculation of your borrowing capacity.
Why choose a premium variable home loan
Whether it’s for your own home or an investment property, nothing beats a premium variable home loan when it comes to flexibility and added features. Variable home loan rates give you advantages and offer repayment options to suit your needs.
Features of a premium variable home loan
- No minimum loan amounts
- Maximum loan term of 30 years
- Additional repayments are possible
- Redraw facility is available
- Repayment holiday is enabled
- You can pay monthly, fortnightly, or weekly
- You can pay the principal and interest or interest only
- You can acquire a split loan
- The mortgage is portable
- The maximum loan to value ratio is up to 95% of the value of the property for owner occupied. Lower LVRs also apply to Investment and interest based loan.
The thing to remember is that buying either a primary home or an investment property is a huge decision, therefore you need to consider carefully.
Of course, there’s a silver lining here. You can actually get the benefit of both worlds by buying a smaller, less expensive property in your preferred area and living in this property for at least 12 months, after which you move out and buy another property or rent a new home while renting your property to another.
Best of luck!
