Investment Home Loans
When choosing a loan for your investment property, we want to ensure you’re well informed every step of the way, so you can choose the right loan for your needs.
Before choosing an investment loan, it’s important to consider the factors that could affect the type of loan you choose, including interest rates, fees, costs and other features. Here are a few things to keep in mind when choosing the right loan for your investment property goals.
Loan to value ratio (LVR)
LVR is the percentage of a property’s purchase price that a lender will let you borrow.
Typically, if you borrow more than 80% LVR (that is, you have a less than 20% deposit), you may need to pay Lender’s Mortgage Insurance, which protects the lender – not you – if you default on your loan.
A lower LVR typically represents a lower risk to lenders and higher possibility to qualify for lower interest rates. For example, if you buy a property for $500,000 and need a loan amount of $300,000 to purchase it, your LVR will be 0.6 or 60%.
Your Aussie Broker can help you with calculating your LVR and helping you understand the total deposit you’ll need for your investment property.
Types of Investment Loans
Property investment loans are not too different from regular home loans and give you most of the usual choices between fixed and variable rates or a combination of the two. As with other home loans you can choose between:
Variable rate home loans
As the name suggests, the interest rate you pay may vary depending on changes made by your lender. This type of loan gives you the flexibility to make extra repayments if you choose to, helping you pay off the loan quicker.
Fixed rate home loan
A fixed rate loan charges you the same interest for the entire fixed rate period. A fixed rate can be useful for investors as it provides certainty of repayments and a more manageable cash flow.
Split rate home loan
Like home owners, an investor can choose to split their loan between fixed and variable components. Some lenders can let you fix one part of your home loan, and keep the remaining portion at variable rate – giving you the best of both worlds.
With an interest-only loan, your repayments cover the interest on the loan amount borrowed during the interest-only period. This type of loan can be useful for investors due to the tax benefits you might be eligible for.
With so many loan options available, it’s worth speaking with your Aussie Broker who can help you find an investment loan that suits your needs.
Choosing a business loan will depend on your business needs and strategy. Business loans can be used to pay for expenses including:
- Shop and office fit outs
- Office equipment
- Commercial vehicles
- Equipment and machinery
Investment loan fees and costs
It’s good to have an understanding of the additional costs and fees that may come with an investment loan so you’re prepared.
Some investment loan costs may include:
- establishment fees
- Lenders Mortgage Insurance (LMI)
- administration fees
- early exit fees
- discharge fees
- and refinancing fees
When deciding which investment loan to go with, it’s a good idea to check if there are any fees and charges associated with the loan. An Aussie Broker can Help you with this.
Like choosing the right investment property, it pays to do your homework and choose the right loan for your circumstances.
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- Chapter One : Things to consider before investing in property
- Chapter Two : Determining where to invest
- Chapter Three : Investment Properties by Dwelling Types
- Chapter Four : Finance for Your Investment Property Purchase
- Chapter Five : How to Invest in Property
- Chapter Six : Adding Value to Your Investment Property
- Chapter Seven : Positive and Negative Gearing
- Chapter Eight : Getting Your loan
- Chapter Nine : Selling your Investment Property