Property investment loans are not too different from regular home loans. As with other loans you can choose between:
Here the rate you pay fluctuates typically in line with changes to the official cash rate. This type of loan tends to have a range of flexible features like redraw however as investors can usually claim the loan interest as a tax deduction there may not be much incentive to pay off the loan sooner. So the features of a variable rate loan may not appeal to investors as much as they do to owner occupiers
A fixed rate is often very useful for investors as it provides certainty of repayments. This can be helpful because the rent payments on a property will be fixed during the lease term, and even if market interest rates rise the landlord may not be able to raise the rent until the lease expires. By locking into a fixed interest rate investors have more certainty about the repayments on their property and a more manageable cash flow
Like home owners, an investor can choose to split their loan between fixed and variable rate components
There are two types of loans that tend to be particularly attractive to investors:
With most standard home loans your repayments are made up of interest charges plus a small repayment of the loan balance. In this way you slowly chip away at the original amount borrowed over the term of the loan.
Where an interest only period is present the loan principal remains the same unless you choose to make additional payments. You only have to pay the original amount borrowed if you sell the investment property or if the interest only period expires.
This type of loan is useful for investors because during the interest only period of the loan:
If you already own a property, a line of credit offers a way for you to tap into any equity you have built up in that property and, use it as a deposit for your investment property.
This type of loan is useful for investors because:
With so many loan options available it is important to have the loan in place that best suits your needs and investment strategy. So, speak to a Melbourne Finance Broker today who can look through sift through the thousands of investment loans offered by a wide variety of lenders to help you make the choice that is right for you.
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