Menu Close

Types of Investment Property Loans

When it comes to real estate investment, finding the right property at the right time is only half the battle. It is also important to find appropriate investment property loans that can realistically be paid off in time. That means, getting a loan that has minimal interest and reasonable loan term.

There are various home loans available in Australia. However, there are various aspects that need to be considered depending on your individual strategy and preference. Looking at the kind of real estate property you want to invest in is also vital in selecting the type of loan you should go for.

Here are the three choices when it comes to investment property loans:

Standard Variable or Fixed Rate Home Loan 

A number of lenders in Australia may permit you to borrow up to 90 percent of purchase value of your investment property. There is a catch; most borrowers are required to take out a mortgage insurance which can be quite expensive.

In addition, it is crucial to decide whether to get a fixed rate or variable rate home loan. Depending on external circumstances, you might save or lose significant amounts of money because of your decision. Look into the current market condition and decide which option is best for you at this point.

Interest Only Home Loan 

This option enables to you repay the principal at the end of the loan period (typically within three to five years). Basically, the borrower only needs to repay the interest component. This type of investment property loan has lower repayment compared to principal +interest loan.

Equity Home Loan 

Once you substantially own a significant portion of your property, it is possible to get an equity home loan. This type of investment property loan lets you borrow against your “equity” (the difference between the market value of your property and the amount of debt you carry). It can be taken in stages or in full, making it especially helpful for property investing.

Essential Consideration 

There are some techniques that will help you maximize possible tax benefits. It can also help you pay off your property sooner. Some options include:

  • Interest in Advance Home Loan – paying off next year’s interest today can create a tax deduction for you. Take note that this feature is only available for eligible borrowers.
  • Mortgage Offset Account – use the interest earned on saving and your savings to pay off the principal amount. Implementing this strategy enables you to save significant amounts of money over the long term.

Buying real estate assets using investment property loan can pave the way to financial freedom. If used wisely, the loan can provide the best return for you. It enables you to gain a lot of profit in a short span of time. It is also a good idea to get the services of an agent in Australia. They can help you find the best bargain properties.

Usually, these agents have a wide network of contacts that can introduce little-known Australian properties to you. Agents can also negotiate on your behalf if you ask them to provide this service.

Leave a Reply

Your email address will not be published. Required fields are marked *