Making the decision to invest in property – especially when starting out – requires careful consideration of a variety of factors. One of them is finance. We call it the property investment financial minefield.
In my 40+ years of experience of my own and clients’ property investing, I have found it pays to be very clear on the financial details. And to ask some serious questions before committing.
These, I believe are the key questions you need to ask if you want to avoid the property investment financial minefield:
▶ Do you have a financial buffer in case of unexpected events … like a pandemic? Do you have cash put away for a rainy day that you can draw on if needed?
▶ How attractive are the terms of your loan or mortgage? Whilst our interest rates are very low, and possibly could go lower, interest rates are only one component.
▶ How easy would it be to renegotiate the loan if difficult circumstances befall you?
▶ Will you be able to pay your mortgage off more quickly – or, conversely, more slowly – if needed because of a change in your situation?
▶ Have you taken into account any extra costs that might be imposed, such as when changes to your mortgage might be needed because of extenuating circumstances, such as those at present, over which you have no control?
▶ How flexible is the loan? Can you redraw or increase it if you decide the property needs renovating, for example?
While the current situation is very fluid, banks are now looking very hard at servicing. They want to protect their investment and will want to know how you intend to pay your mortgage. With the post-pandemic economic outlook predicted to be difficult, banks are constantly looking and relooking at their terms and methods to be certain risk levels remain low.
The upshot is now, more than ever, don’t make decisions about this until you have done your homework. Do that first and you will avoid the property investment financial minefield.