How to use your tax return to buy a house
It’s tempting to blow your tax return on new toys and expensive nights out, but have you ever considered using it to buy your first house and start setting yourself up for financial success? An investment into property will set you up for later life, because while the mortgage decreases over time the value of your home will increase. When your investment property increases in value, you can either access the growth value by refinancing your home and pulling it out in the form of cash, or you can use the equity as a deposit on your second investment property and grow your portfolio!
This is how it would work:
- Educate yourself! There are dozens of YouTube videos, webinars and blogs about property investment basics. Take the time to learn about finance, mortgages, capital growth, positive/negative cash flow, loan to value ratios, offset accounts, depreciation, etc.
- Secure your deposit! Your tax return is your ticket into the market, so plan to put it aside as a deposit on a new home. This means setting up a new bank account to let it sit in until you are ready to make the investment.
- Finance Assessment! Talk to a finance broker to get your serviceability and borrowing capacity checked. This is a free service, as brokers are only paid referral fees by the banks if they manage to set you up with a mortgage. You don’t pay them for their services. When speaking to a broker, just ask them up front if there are any fees and they will clarify this for you. So don’t be shy, get the brokers to work hard for you while not being obligated to go ahead with a mortgage if you don’t want to.
- Decision time! Now you’ve had your finances assessed, you will know two key things; how much you can borrow, and how much you actually want to borrow. You may want to borrow less than the maximum amount the bank will lend you so you have more manageable repayments. Now you can finally decide how much you want to spend on your new investment property.
- Go shopping! Now you know your spending limit, it’s time to go shopping. We recommend using a building sales consultant to help you work out house and land package options in the areas you are interested in. The Start Right Homes consultants work closely with Perth’s land developers and are experts at matching vacant blocks with house designs to meet a budget. The building consultants only get paid if you actually buy a house with them, so don’t be shy and get them to do all the hard work for you!
- Make the leap! Once you are happy with the location, house design, specification and price, make the leap and get yourself into the property market. This is where you may start to doubt yourself. Fortune favours the brave, so back yourself. You’ve gotten this far and you certainly won’t go any further if you don’t take this step.
To your success