Many wealth building programs stress the importance of property ownership as a wealth building vehicle. That is all very good and well, if you can find the funding for it. And that can be the fly in the ointment so to speak. It is a lot tougher to get financing for a second home than it is to get for a residence.
It is harder, but can be done. Start off by checking the balance in your home loan versus the value of the property. This can be a great finance option. Also get your hands on your credit report so that you know what your rating is. You want to make sure that you will be able to get a good rate as even 1 percentage point can mean the difference between make and break for a deal. What you also need to take into consideration is that this finance will generally cost a little more than you would be paying if you were buying a home for yourself. You will also need to be able to prove that you can handle the new installment on top of the existing one. If you plan on buying a rental property, proving affordability may be harder. What happens if your tenants are deadbeats? What happens if you are unable to find tenants? Can you afford to pay on your own.
If you are relying on rental income to help with the affordability calculations on the bank’s side, you need to approach this as you would a business loan. You need to get in an expert appraiser to consult on the rental potential of the property and area in general. You need to put a basic business plan in place to show that you have thought this through well. The lender needs to be convinced that it is a safe business bet to give you the financing that you are looking for. Prior rental records can go a long way to help proving your case. Use them if you have them. Also peruse your contract to ensure that renting out the property is not strictly forbidden in terms of it. Let the lender know that you are purchasing property for rental income and you should be fine. Use the best mortgage calculator with pmi now.
On the upside, there are some nice tax benefits that can be called into play. Sit down with your tax advisor and see what deductions your are allowed to claim on your tax return in regards to this property deal and sit back and save money.