Don't get out of your depth

Property investors who are hoping for easy money and first-timers keen to get a foothold on the property ladder will have to weigh the numbers carefully…

Home loan interest rates are rising and, in what should be a warning, more home-owners, particularly recent first-timers, are coming under increasing mortgage stress. Of the 251,000 households in which owners became first-time buyers in the past 18 months, almost 40 per cent — or 101,000 — are experiencing some form of mortgage stress, with 30,000 of those experiencing “severe” mortgage stress, according to Fujitsu’s Mortgage Stress Report for January.

The managing director of Fujitsu Consulting, Martin North, says first-timers have to be especially careful. He says they need to do a “robust” budget and know what their incomings and outgoings will be after they take out mortgage repayments. “Fewer than half the people we surveyed for the Mortgage Stress Report did not have a robust budget to start with,” North says. “They did not really know what they could afford.”

Formula 1 Finance are experts in establishing budgets and structuring home loan & investment loans to those budgets.  We continuously assist customers to reassess their budgets to ensure they are achieving maximum savings and minimum interest charges as their lives change.

Investors would do well to seek information on vacancy rates in the areas they are thinking of buying in. Vacancy rates are expressed as a percentage. If a suburb has a vacancy rate of 10 per cent, for example, it means that one in 10 properties for rent in the suburb is vacant. A high vacancy rate may indicate difficulty in renting out a property, that the rental yield may be low and that rental growth may be slow.

SQM has a free online search service where users can view monthly changes in vacancy rates by suburb or region at
SOURCE: Money Management / Formula 1 Finance