An investment property loan is a loan which finances the purchase of a residential investment property. It is essentially a mortgage for a property you rent out. Investment property loans and home loans differ in a number of ways. For example, investors generally need a slightly larger deposit to purchase an investment property as opposed to a home to live in & the interest rate on an investment property loan is slightly higher than on an owner occupier loan. Whilst an investor may need a slightly larger deposit to purchase an investment property, if that Investor has equity in another property, be it their own home or say another investment property, the Investor may be able to borrow 100% of the investment purchase price + the purchasing costs. The vast majority of Investors entrust their property financing requirements to Mortgage Brokers, and this is due to Brokers having access to hundreds of investment property loans from up to 40 different Lenders.
The overriding reason to purchase an investment property is to potentially profit from the investment property increasing in value over time, i.e. capital appreciation. The combination of the property increasing in value & you paying the loan down, may result in solid property equity. An added bonus is that you may also get some tax advantages from purchasing an investment property. Expenses which are incurred in acquiring & holding your investment property may be tax deductible. These tax-deductible expenses include interest on the investment property loan, finance set up costs, real estate management fees, council rates, and maintenance costs. You need to speak to a qualified Accountant who will assess your situation. Negative Gearing, where the costs of acquiring & holding an investment property exceed the rental income from the investment property, is going to be a massive election issue in May 2019. Make sure you know where each political party sits on Negative Gearing.
Whilst there is no shortage of Lenders & lending packages to choose from, deciding on which Lender & which finance package can be extremely overwhelming. A Better Choice Mortgage Broker will filter through the hundreds of loans available from up to 40 different Lenders to see which finance package best suits your needs .There has been a number of significant policy changes to investment lending over the last 5 years and a Better Choice Mortgage Broker is best placed to advise you which Lenders are worth considering & which are not . Whilst the decision to purchase an investment property or not is completely up to you, there is a massive amount of value to be gained from speaking to an experienced Mortgage Broker. Many clients use their Mortgage Broker as a sounding board, someone to bounce ideas off. A Better Choice Mortgage Broker will never claim to be an expert in all things property & property related, we’re finance experts. But a Better Choice Mortgage Broker will relay to you their experiences & in need refer you to experts such as Accountants & Financial Planners. If you are considering purchasing an investment property amongst other things you need to consider where you wish to purchase , how much you wish to spend , how much you can afford , the ownership structure of the property and how you wish to structure the finance .
Deciding the repayment type you will implement for your investment property loan is another decision requiring you to seek & process information. Should you make principal & interest repayments or interest only repayments on your investment property loan? Principal & interest repayments involves you paying the accrued interest & a little of the loan principal back each month, whilst interest only repayments involves you just repaying the accrued interest on the loan each month. Generally, the max term of interest only repayments is somewhere between 5 – 10 years. Just remember if you go with interest only repayments say for 5 years, in 5 years’ time the loan balance will still be exactly the same as when you drew down the loan 5 years previously. If you have an owner occupier home loan & an investment property loan , there is a strong case to be made for just making interest only repayments on the investment property loan & putting every spare $ into the non tax deductible owner occupier loan .To know which type of repayment is best for you, talk to a Better Choice Mortgage Services Mortgage Broker and also engage the services of a qualified Accountant .
Why make the process more difficult than it needs to be? Get in touch with a professional Mortgage Broker at Better Choice Mortgage Services whose wealth of experience will help you choose the lender and loan which suits you.
You may not wish to invest in real estate; buy may wish to invest in shares or managed funds. If this is the case, then a Better Choice Finance Broker can help you finance that as well.
Better Choice Mortgage Services strongly recommends that you seek independent financial and legal advice prior to embarking on an investment strategy.
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