By now, you should have a clear purpose for investing in property, with well-established property investment goals. You are really comfortable with property as an investment vehicle and you know how much extra you can comfortably afford to pay each week towards a property. The next step is to have your financial capacity assessed – organising your finances!
To have your financial capacity assessed you will need to engage the professional services of either a mortgage broker or a lending officer at a bank/building society/credit union. You would be requesting a loan pre-approval. This will establish the amount you are able to borrow and hence your property purchase price limit. This is really important as it eliminates wasting time looking at properties that are not within your price range and stops you having to guess at what you think you can afford.
Generally speaking, to assess your financial capacity, your lender will request to some or all of the following documents:
- Sources of identification (Driver’s License or similar)
- Bank, Credit card, Existing Loan Statements
- Current Pay slips; evidence of other income such as Agent rental statements
- Group certificate / PAYG summary
- Centrelink statements (if applicable)
- Last 2 years tax returns + ATO Notice of Assessment
It is important to note at this stage that everyone’s circumstances are different. Funds to contribute to the loan may be coming from a variety of places such as equity in your personal home, a superannuation fund, from inheritance, or from savings. You may also have other investments that have equity in them that you can use. The one thing you need to be aware of is that you always leave yourself a money buffer (never use your entire equity and/or savings) and always add your purchase costs (stamp duty, conveyancing, mortgage insurance) to the purchase price when comparing to your pre-approval amount.