Here are four more questions from doctors that were put to Pete Wargent, author of Get a Financial Grip.
Should a doctor invest in property, shares or both for wealth creation?
It’s down to personal choice. My preference is to invest in both asset classes as this provides a level of diversification.
It is certainly true that either asset class can be used to attain great wealth.
However, if I had to choose the one asset class which gives the average Australian the best chance of attaining financial freedom more quickly it would be residential property, simply because it is easier to get rich using millions of the bank’s dollars than a few of your own.
What % of a property’s value should a doctor save for the deposit?
Lending sentiment tends to shift through economic cycles.
At this point in time, a 10% deposit should be enough to secure you a property, and you will need to have saved enough to pay stamp duty and other acquisition costs such as legal fees.
However, do note that if you take out a 90% mortgage you are likely to be charged Lenders Mortgage Insurance (LMI).
A 20% deposit would ensure that you are charged no LMI and in some circumstances lenders may accept 15%.
LMI can be capitalised into your loan so you may decide to accept it and go with a 10% deposit.
In relation to salary, how much should the value of a doctors first home be and what is the upper limit of monthly mortgage repayments?
Much depends on your tolerance for risk.
It is sometimes said that if you are paying more than 30% of your gross income on a mortgage then this represents “mortgage stress”.
However, if you are a young doctor with the prospect of earning a higher income as your career progresses then you may decide to ‘stretch yourself’ on your first home.
If you decide to go down this route then the property value may be a relatively high multiple of your income working on the assumption that your income will increase over time while the mortgage is paid down.
What is your number 1 tip for doctors for wealth creation?
Commit to continually learning about investing and never, ever give up!
We hope these answers have been of benefit to you.
As a doctor, have you achieved wealth through property, shares or both?
Or, do you have any questions for wealth creation through property or shares?
We would love to hear your comments.