What You Need to Know About Investment Loans?
Investing in property? There are a range of residential investment loans to meet the varying needs of property investors. In fact, property investment loans are not too different from any other type of home loan.
Property Investment Loans for when deciding on the right investment loan most people only consider the interest rate.
Property investment loans include many other considerations like (hidden) fees you pay which can include:
- Application/establishment fees, range from $0 to $1,000 and more depending on lender and the type of loan you need
- Ongoing fees can range between nil to $550 per annum
- Early exit fees/penalties from $0 to thousands
- Fixed rate loan and economic costs
- Discharge fees in order to get your title back you need to discharge any mortgage held over it, lenders charge differing fees
- Mortgage insurance fee depending on lender/insurer, which is calculated using a percentage of loan amount (LVR)
- Additional lending costs, charged to access any additional funds you have paid on your loan (redraw)
- Fees charged for changing the security over loan and switching loan products also vary between lenders
- Valuation costs and legal fees should also be considered…
Property Investment Loans, it’s important to tailor the correct product to suit your investment needs.
Property investment loans example…let’s say you want to maximise the most suitable finance structure by using the best tax structure discussing the options with your tax professional.
Property Investment Loan Types: Property investment loans are no different to home loans. Interest rates, fees and lending policy are very similar:
- Variable rates
- Fixed rate loans
- Line of credit
- Construction loan
- Low doc loan
All these types of loans are available for investment property loans.
It does not really matter what type of loan you choose just as long it fits your investment strategy using an interest rate which is competitive and fees (as discussed above) are not excessive.
Property investment loans considerations: professional packaged loans that allow you to put multiple loans under the one package which can help to save on establishment costs and ongoing fees.
Line of credit loans can be used to access equity from an existing home, used as a deposit or to purchase an investment property. If you already own a property, a line of credit is a good way for you to tap into any equity you’ve built up in property which can be used as a deposit for buying investment property.
A line of credit loan allows you to draw from a fixed amount at any time to pay for whatever you want. It’s kind of like a credit card with a big limit but the equity in your home acts as security for the loan.
Interest only loans and principal and interest facilities may be better utilized depending on your personal circumstances and investing objectives. Interest only loan the principal remains the same.
You only pay the original amount you borrowed when you finally sell investment property as this type of loan is useful for investors because your monthly repayments are less than they would be if you were paying off principal as well.
Fixed or variable rate loans also depend on borrowers risk profile and property investment strategy.
Long term property investors with a long term views prefer fixed rates so they know exactly what their repayments are.
Interest Only or Principle and Interest: Interest only loans allow you to only repay interest on the loan without reducing the principle loan amount.
This can assist in allowing a borrower to reduce non-deductible debt or bad debt more quickly. Principal and interest repayments allow debt to be reduced and more equity to be established.
Most property investors prefer interest only loans for the following reasons:
- Investment interest repayments are tax deductible
- Principle payments are not tax deductible
- Principle payments are better utilised via personal non tax deductible debt which reduces amount paid each month freeing up cash flow…
Property investment loans like other loans means you can choose fixed, variable or split interest rates with flexible features like redraws, etc…
Property Investment Loans