Interest rates may be at record lows but are you making the most of them? A quick check could give your investment returns a valuable uptick.
It’s amazing how much things can change in the mortgage market in just a short space of time.
Not so long ago, interest rates on investment loans were quite a bit higher than for owner occupiers. But it seems that’s changing.
Investor loan rates are softening
In its latest Financial Stability Review the Reserve Bank of Australia (RBA) noted the cost of home loan finance has fallen thanks to successive cuts to the official cash rate. However, the RBA also pointed out that lenders are competing for new customers – investors in particular, and as a result the price gap between investor and owner-occupier loans has narrowed.
This is important news for investors.
You see while interest on an investment loan is normally tax deductible, taking advantage of opportunities to reduce the rate makes good financial sense. A lower rate can make a significant difference to the profitability of your investment, and paying less interest puts money back in your pocket.
More smart reasons to review your loan
The only way to know if you are making the most of record low rates is to speak with your local Aussie broker to see how your current loan stacks up.
There are other good reasons to review your current investment loan too.
Refinancing can provide an opportunity to lock in an ultra low fixed rate. This option also provides certainty of your outgoings, making investment cash flow easy to budget for. Equally, if your current fixed rate term is coming to an end, ask your lender about the revert rate – if it’s not competitive, refinancing can help you secure a better deal.
If your tenant is preparing to vacate the property, you have a window of opportunity to revise the rent. It’s good practice to review your loan if you’re preparing to attract a new tenant. Once a new lease is in place it’s not easy to increase the rent, so now’s the time to be sure you are paying a highly competitive rate on the loan.
Talk to your Aussie broker
Yes, it’s a busy time of year but it always pays to give due attention to both sides of your rental investment – the property and your loan. Speak to an Aussie broker for more ideas on how you could make the most of today’s historically low interest rates.