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Just because you don’t earn a six-figure income it doesn’t mean you can’t break into the property market as a young person.
Granted that property prices have skyrocketed in many capital cities – in particular Sydney and Melbourne – however, starting up a property investment portfolio is still a realistic prospect for the keen young investor.
But it’s not without its challenges.
The most challenging part of investing as a young person is getting finance. Because of their shorter work history and lower savings, young borrowers are often considered riskier compared to their older counterparts.
The other big hurdle is the limit to the amount you can borrow. Generally, young investors don’t have the earning capacity that older borrowers do. This may restrict your options on what and where to buy.
Fortunately, there are ways around these obstacles.
In order to get finance, you need to demonstrate your ability to pay off your loan. This includes earning enough income to cover the mortgage repayments.
Lenders usually want to see consistency in employment and residential history. They’re generally looking for a clean credit record and good savings pattern.
To fast-track your loan application and boost your chances of getting the finance, you may want to consider the following tips:
Yes, this may mean moving in with mum and dad in order to save. But living rent-free with parents can also boost your borrowing power, which means the bank may lend you more money as a result of having low living expenses.
Having other personal loans, car loans or high credit card limits could dramatically lower the amount you can borrow. Make it your priority to pay off these debts and reduce your credit card limit to a minimum.
Make it a habit to put aside money from your income, even casual jobs. Generally, you need to be able to show at least 3% of the purchase price as a genuine savings over a six-month period.
Earning a little extra on the side will go a long way in boosting your borrowing capacity and may also put you in a good light with lenders.
With interest rates so low at the moment, the banks have plenty of qualified borrowers to choose from. This means they could reject those with less than stellar credit records. To maintain a clean credit history, make sure you pay off your bills on time, every time.
This is one of the fastest ways to break into the property market. This may also help you borrow more for a better quality investment property.
As you can see, with a bit of sacrifice and education, you can break into the property market sooner and start building your financial future.