Buying a second propertyBuying a second property can prove to be very rewarding and profitable. However, there are also many considerations and possible difficulties that come from owning a second property. If you are buying to let you will be dealing with tenants, or at least with a property manager who you pay a small fee to manage the rent and tenants on your behalf. 
Should I Buy A Second Property?
You should start by considering your financial position. It's worth speaking to an independent mortgage broker before you take the plunge. A good broker can recommend strategies for making the second property work for you, taking into account your existing financial commitments. Ask yourself, can you afford to tie up money in a property long term? If the worst happened, could you afford to lose money? And are you in a position to finance any repairs or other work on the house? Rental properties should be viewed as a long-term investment.
Financing Options
One way to finance a second home is to set up a Line of Credit (LOC) on your existing property. If your current home has increased in value, and you have been making at least the minimum repayments on the home loan, then you will have accrued some equity in your home (i.e. the loan balance is 80% or less of the property value). If you have say, $200,000 equity then you can use this to fund a new loan. You can access the funds from your LOC to pay a deposit and legal costs.
Another option is to consider an interest only loan. Interest only mortgages are becoming increasingly popular. It works by you only paing the interest each month. This results in lower monthly repayments which is attractive to some home buyers. The interest only payments do expire after a set period of time - one to five years - and your loan will then change over to a normal principal and interest loan for the remainder of the loan term. Features such as extra repayments and redraw facilities do not typically come on this type of loan.
You can also look at a standard variable rate loan - with principle and interest. Variable rate home loans are a good option for your investment property as long as it is a residential property. You will be required to make the minimum repayments set each month, for an agreed term which is usually 30 years. Variable home loans offer you the flexibility to make extra repayments and withdraw at a later stage.
The most important thing is to make sure the property you choose is one that you can afford and will get a good rental income. Talk to a Perth mortgage broker about second property options that will suit your requirements.
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