Property investment loans are not too different from any other type of home loan. Like other loans you can choose fixed, variable or split interest rates and flexible features like offsets and redraws. But there are two types of loans that tend to be more attractive to investors.
Interest only LOANS
With most standard home loans your repayments combine the interest you owe on the principal amount you borrowed, plus a little bit of the that principal as well. In this way you slowly chip away at that original amount over the term of the loan.
With an interest only loan the principal remains the same. You only have to pay the original amount you borrowed when you finally sell the investment property (and hopefully make some capital gain).
This type of loan is useful for investors because:
Your monthly repayments are less than they would be if you were pay off principal as well. You can get tax deductions on the interest payments, but none on principal repayments. It makes it easier to calculate the true returns from a property.
Equity Release/Offset Account & Line Of Credits
If you already own a property, an Equity Release Loan with an Offset Account, or Line Of Credit is a way for you to tap into any equity you have built up in an existing property and use it as a deposit for your investment property purchase.
Whilst both facilities allow you to draw any amount within your fixed limit, to cover your initial investment requirements, they are quite different in how they operate and the rates that are offered. Like when choosing any other home loan, you need to compare rate, features, fees and charges to ensure that the loan you select is the most compatible for you.
Talk to one of our finance consultants for further assistance.
