Property investment loans actually are quite similar to regular home loans. Like with any other loan you are able to choose from the following:
Variable Interest Rate
Typically the rate you pay will be in line with official cash rate changes. This kind of loan has a tendency to have a number of flexible features such as redraw since usually loan interest can be claimed as a tax deduction there might not be a big incentive for paying the loan off sooner. Therefore a variable loan rate’s features might appeal more to owner occupiers than they do investors.
For investors a fixed rate is frequently useful since it provides certainty on repayment amounts. That can be quite helpful since a property’s rent payments will be fixed over the course of the lease term, even when market interest rates increase. In that case, the landlord might not be able to increase the rent amount until the lease has expired. When a fixed interest rate is locked into it provides investors with more manageable cash flow and more certainty regarding property repayments.
An investor, like a home owner, may decide to split their loan and have a variable rate component and fixed rate component.
Investors tend to be especially attracted to two kinds of loans:
1. Interest only
With a majority of regular home loans repayments are comprised of a small repayment amount going towards the loan balance and interest charges. That way you chip away slowly at the original amount that you borrowed over the course of the loan term.
When there is an interest only period in place, the loan principle amount stays the same unless you decide to make extra payments. The only time you need to pay back the original amount that you borrowed is after the interest only time period expires of if you sell your investment property.
For investors this kind of loan is quite useful since during the time period of interest only on the loan:
Monthly repayments are lower than if you were also paying off principle
Tax deductions are not allowed for principal repayments but they are for interest payments
2. Line of credit
When you own a property already, a line of credit provides you with a way of tapping into whatever equity you have in the property and using for a deposit on an investment property if you wish.
For investors this kind of loan is useful due to the fact that:
A line of credit loan enables you to draw from the fixed amount whenever you have any additional expenses that you need to pay.
It is similar to having a credit card that has a high limit. However, in this case the security on the loan is your home’s equity.
Your local Gold Coast Mortgage Broker is here to help you
With all of the various loan options that are available these days it is very important having a loan in place the suits your investment strategy and needs the best. That is why it is very worthwhile to speak with us and we will be able to search through hundreds of different loans that are offered by a broad range of lenders and assist you making the best choice for you.