Look locally to see what the real rental returns could be

A reputable, licensed mortgage broker, who has lending agreements with a wide range of lenders, should be able to tell how much you can realistically afford to borrow based on your financial position, goals and income and provide you with a number of suitable options.

Always ensure there is enough of a buffer in your budget in case interest rates rise and your monthly repayments increase. Alternatively, consider taking out a fixed-rate home loan if you want certainty or splitting your home loan between fixed and variable to hedge your bets.

Be aware that some brokers and lenders will try to charge you a higher interest rate for an investment loan, insisting it carries more risk.

However, other lenders do not differentiate between investors and owner-occupiers, so keep a look out. Before signing up, ask the lender to waive the establishment fee. Many lenders will waive these to secure your business.

This article is fromProperty Observer's free ebook Top 10 Property Investment Tips