(Re)Financing: Tips for Property Investors

When you are buying property you need money to finance the investment. Here are some things to consider if you are either refinancing your property or trying to find funds to purchase an investment property.

1 - Shop around.  Don't just go with what you know. If you already have a lender, don't assume that they will give you the best deal. Things change all the time, smaller banks and lenders often have more flexibility compared to the big-box banks.

2 - Lower rates aren't always going to give you the most savings. Make sure you look at the fine print and find out if there are any hidden fees.

3 - Don't wait out the RBA. Rates may or may not drop, if you see an investment property on the horizon, get the financing sorted out pronto. In fact, you should really have that sorted before you start looking.

4 - Get it in writing. Has your broker given you a rate? Get it locked in, in writing.

5 - How good are you at maths? Getting a cut in you interest rate by about 1% can save you about $100 per month.

6 - Going against what I said in number 2 - if you have a lender and are refinancing, be careful when you switch. There will be fees up the wazoo - establishment fees, legal, ongoing, stamp duty…. make sure switching to a new lender adds up the right way.

7 - How's your credit? Just because you think you have good credit doesn't mean it's all good. Make sure you get someone to check your rating to ensure you can get the best deal. The stronger your rating, the better - obviously.

8 - Don't fall for the honeymoon. You can get a low rate at the start, but what happens when it changes? How will that position your loan in the long run - and monthly payments?

9 - If you refinance, don't use the money to pay off debt, unless you are changing your spending habits. You could create the never-ending nightmare.  

10 - Your down payment. The bigger the better.  If you are financing from scratch make sure you have a good 20% chunk in most cases (not all). If you can swing a 25% down payment, then you may qualify for an even better interest rate.

Bonus tips:

Here are some other places you may look for cash. You may or may not be successful with these options and of course, get input from people who know their dollars and cents!

• Home equity lines of credit, 
• Credit cards
• Life insurance policies
• Owner financing
• Peer-to-peer loans
• Maybe you could start a Crowd source campaign - who knows if it's possible?

So what is the most creative way that you've manage to cobble together funds to buy an investment property?

NOTE: I am not an expert in financing, these are thought starters. Make sure you get input from someone more knowledgeable than myself.