One of the most important questions when it comes to buying real estate is not the property’s location, but rather how to pay for it. While some buy property with cash, most purchases will involve sourcing finance of some type or another – some go for your traditional mortgage provided by a regular lender like a bank, and others for more unconventional sources of money such as a private mortgage lender.
Don’t end up with a great property bought with a quick and bad mortgage
Something that we’ve noticed though is that many people in the market to buy real estate spend a lot of time looking for the perfect property for their purposes – and far too little time sorting out the details of how the purchase will be financed. The reality is that it’s far better to run the purchase the other way around. Know how you’ll pay for it long before you find it.
If you’re a real estate investor, then these details should have been worked out long before, as sourcing finance is a key part of your real estate investment business plan. Buyers who intend to occupy the property they intend on buying need to be extra disciplined in this regard. For this group of people, it is crucial to get the finance right from the beginning.
So put a hold on trawling the internet, prospecting for properties – and instead sit down with a calculator and crunch some numbers. This doesn’t have to be painful, or even difficult – the key is to be honest when you calculate what you can afford. Don’t overestimate income, and underestimate expenses – it’s a recipe for disaster. If anything, your estimates should go the other way around, so as to minimise the effects of miscalculations and unexpected events.
There are, of course, professionals like mortgage brokers who will be able to put you into contact with a wide variety of lenders without having to do the shopping around yourself. Be aware though, that it may be worth your while to take a look around and see what’s available in the marketplace, as not all brokers have access to good deals when it comes to mortgages. Another consideration is that brokers often make a substantial commission on your mortgage – so ensure that the loan that the broker recommends is actually the right one for you, not the broker’s sales target.
Buying real estate is great fun – but it can quickly turn into a nightmare when things like finance get in the way of enjoying your property. Make sure you get a handle on your finance early, so that when you do find the perfect property for you, you have the finance sorted out for a quick and painless transaction.