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GUEST OBSERVATION
You may assume purchasing property is like riding a bike; once you buy your first property, it’s easy to just repeat this when you purchase again. But this isn’t always the case.
Depending on how long it has been since your first home purchase, a lot may have changed in the property and lending industry. So what things do you need to consider before purchasing your second property?
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Deposit Most first home buyers struggle with saving for a deposit and you may even remember how difficult it was. But this time around, it may be a little easier. As this is your second property, you may have either the proceeds of the sale of your last property, equity in another property or savings. If you are in a good equity position, it may mean that you will be able to borrow 80% or less of the purchase price, meaning you will avoid paying extra on lenders mortgage insurance. However, when applying a home a loan, remember you need to show a combination of both equity and income to be able to meet repayments 
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Finances If you require a home loan for your second property, the process is similar to taking out a loan for your first home. When you start shopping for a home loan, you will need to have the following details at your fingertips to enable lenders to assess your situation: • Selling price of your existing home (if you are selling one). • Selling costs not yet paid (agent’s commission &amp; costs, legal fees, adjustments at settlement). • Payout figure for your existing home loan (amount owing plus any exit fees). • The annual incomes of the borrowers purchasing the home. • Income from investment properties. • Details of any regular commitments that are not included in standard living costs such as child maintenance, private school fees, childcare costs, contractual obligations to make regular payments like pay TV. • Combined credit card limits. This is the total of the maximum debt that you could draw your credit cards, including any interest free accounts that haven’t been closed down. • Details of any other debts – amounts owing and payments being made. • The number of dependents that you have. • The values of any other property or investments that you have, and whether or not those investments could be sold to help fund the purchase of your new home. • Balance of savings that will go towards the purchase. 
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Finding a property Even if you only bought your first home recently, you will still need to research the property market carefully as it can change quickly. Areas that may have been considered a hot spot last year may no longer be considered a hot spot this year. This is why you need to do your research on areas that are developing and monitor population growth and housing demand. Also, if this second property is going to be an investment, remember, you are not looking for a property that will suit your needs. So, the location and type of property could very well be completely different to a home you want to live in. 
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Management of Extra Costs If you are purchasing a second property as an investment, then money management will be extremely important. This purchase will have a big impact on your budget, so you will need to make sure you can handle it. It is important that you have enough income to cover mortgage repayments for all of your properties. Although the rental income can be used to help pay off the loan, you may experience vacant periods and will have to produce the money for repayments from another source. The more properties you purchase, the easier the process should become. However, it does not mean you should stop doing your research.
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Heidi Armstrong is the CEO for <a href="https://www.statecustodians.com.au/home-loans" target="_blank">State Custodians Mortgage Company</a>. Heidi is an expert in personal finance, securitised lending and the mortgage industry and is passionate about educating borrowers to help make smart lending decisions.
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Four things to check off your list when buying your second property

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Forgetfulness is one of the biggest contributing factors to damaging your borrowing power.
Forgetting to pay a phone bill on time or letting a credit card bill slip by a couple of days can be detrimental to your credit rating when applying for a home loan.
Your credit rating is a prized possession and most Australians probably don’t realise how it’s calculated.
All credit providers including lenders, banks and non-banks subscribe to consumer credit reporting agencies so that they can conduct credit history checks on potential borrowers.
Many people don’t realise just how big the impact of a forgotten bill can be.
It can be difficult to accept that something as small as an unpaid phone bill listed years ago can prevent you from securing a home loan – but the reality is this can severely impact your ability to buy your dream home.
Defaults are looked at as poor conduct. Any defaults over $500 can significantly damage your ability to get home loan approval.
The largest consumer credit reporting agency in Australia – Veda Advantage – uses a credit scoring system to provide credit providers with a measure of assessing risk.
The lowest possible credit score is -200, and the highest is 1200. If you have a repayment of more than $100 overdue for 60 days or more, this can be listed on your file for five years.
One of the very first things that your lender will look at when assessing your home loan application is your credit score.
A payment default can easily contribute to a drop of more than one hundred points in your rating. This drop could make the difference between getting your home loan approved and having your application rejected.
But it’s not all bad news.
Having a low Veda score on its own doesn’t always mean your loan application will be declined.
People with low ratings can sometimes redeem their chances with good equity, long-term employment or a strong net asset position.
Understanding how your credit file is calculated could help to prevent you from damaging your own borrowing power.
My simple advice is – pay your bills on time, every time, to ensure your credit rating is protected at all costs.
Heidi Armstrong is chief executive of <a href="https://www.statecustodians.com.au/" target="_blank">State Custodians Mortgage Company</a>.
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Heidi Armstrong

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