I was planning to write an entirely different article to this one right here. Something about personal finance options for homebuyers cracking the first rung of the property ladder via the bank of mum and dad. Next time maybe.
You see…last night; I saw an advertisement for another online ‘loan market’ portal, proclaiming its many potential benefits for property investors.
The usual hype ensued…free to use, compare hundreds of products across a broad range of lenders, help on hand to ensure you get the best possible deal and save thousands by finding the perfect loan for you, yadayadayada…
All sounds pretty good on paper right? The only issue I have with these services is that, as we move further away from personable interaction in the world of ‘personal’ finance – remember when you spoke to your bank manager for a loan? – we sacrifice some of our power as consumers.
No longer are the transactions between banks and their clientele anywhere near the friendly business rapport we once enjoyed, when you could look the local branch manager in the eye as a loyal customer and shake hands to seal the deal.
Unfortunately, as this paradigm shift has taken place, navigating the world of credit has also become increasingly complex.
More and more options have been thrown into the arena when it comes to the types and number of loans and providers on the market for one thing.
Then there’s the sporadic regulatory intervention off the back of (almost monthly) unprecedented global economic events that throw virtually every developed economy slightly off kilter (if you’re one of the lucky ones).
The rather long point I’m making is that we live in a highly paradoxical time. Change is the only real inevitability in our modern, speed of cyber reality. And change is something you’ll have to learn to bend with as an investor.
There are far more influences on our lives these days than at any other time in human existence, because everything is reliant on economy and economy is reliant on everything.
Take it personally
Machines are fantastic for many things and yes, the internet is a wonderful source of information, providing the capacity to fulfill virtually every one of our needs without leaving the comfort of home…including social(?) interaction.
But when it comes to securing finance as a property investor there are so many variables, which ultimately all come down to your personal investment objectives and plans.
Online loan comparison and market sites cannot sit you down and ask questions that a seasoned industry professional knows will be pertinent to the careful structuring of your very first property investment mortgage.
Questions like; fixed or variable rate? Do I want (or need) the bells and whistles of a business package? Which lender will be more likely to show leniency when it comes to the LVR? Which lender will cap how much equity I can obtain at any given time?
Online portals won’t generally recognise that the loan you take out today, can have long-term consequences over your entire investment journey and property portfolio, from active asset accumulation right into the cashflow phase at retirement.
I know it seems I have a vested interest in this topic…given my profession. But the less personally you take the process of obtaining finance for your first, second, third or twentieth property investment, the less likely it is that the deal you strike will be the best fit for you.
The potential cost of convenience
Much like indulging in too much ‘convenience food’ is bad for your physical wellbeing, seeking ‘convenience credit’ can have serious repercussions down the line.
Talking to a mortgage broker about your objectives and reasons for investing will give them invaluable insights and answers…answers that will guide them in tailoring a financial portfolio, for the balanced and sustained growth of your asset base now and in many years to come.
I’m not saying you shouldn’t educate yourself and explore your options via the many excellent online portals at your fingertips. Heck, it may even work in your favour on occasion to obtain finance through one of these resources. But your primary reason for taking out a loan should never be ‘it was too easy’.