If you are committed to growing your wealth, investing in property is one of the options available to you. Whether you are a new investor, seasoned investor or a high net worth investor, investing in real estate property should help you achieve your financial goals.
What is the Right Loan Type for your Property Investment?
When it comes to financing your investment property, there are many things to consider, one very important consideration is that you will need to consider “what is the right home loan type for your property investment? As there are several different options that you can use. Choosing the right home loan type will depend on your investment structure and strategy, but there is no need to spend days or even weeks researching the options.
Here is a list of the most popular home loan types used by property investors in Australia today:
Variable Interest Rate Home Loans
With a property investment home loan, interest is generally tax deductible, so even though your home loan may be subject to interest rate rises, choosing a Variable Interest Rate Home Loan may be a good option, as the loan will give you flexibility and the ability to maximise your investment property’s profitability. For example, Variable Interest Rate Home Loans frequently come with features such as:
* You are able to make unlimited extra repayment each month so you can pay off your loan faster;
* You can take advantage of inclusions (e.g. redraw facilities and a 100% offset account);
* You can grow the equity (the value of your property, less what you owe) you have in your investment property more quickly, which you could redraw at a later to do renovations and improve the value of your investment property, or even to use as a deposit in another investment property.
Fixed Interest Rate Home Loans
If you are investing on a tight budget, then a Fixed Interest Rate Home Loan may be a better option for you. You will know in advance exactly what your outgoing finance costs will be and these costs will remain the same throughout the fixed interest period of you Investment Home Loan. This may particularly useful for you if you are “negative gearing” your investment property. It is important to remember:
* Whilst the interest on your home loan may be tax deductible, the rental income may not initially cover all your costs; and
* Fixing your finance costs (repayments) will ensure you can budget effectively to meet your ongoing financial obligations.
Split Fixed/Variable Interest Rate Home Loans
Using a combination of a Split Fixed and Variable Interest Rate Home Loan could give you the best of both worlds. You can limit any increases in your outgoing expenses whilst still retaining the ability to make extra repayment and redraw them when needed. This could be a big help to you when you are saving for ongoing costs such as renovations and maintenance.
Interest-Only Home Loans
This type of home loan option could be a good idea if you are investing on a tight budget and you require the rental income from the investment property to cover all your finance costs. Interestingly, many property investors in Australia favour Interest-Only Home Loans as this type of home loan will allow you to minimise your mortgage repayments and outgoing costs in the short term. This type of home loan:
* Will require you to pay just the interest on the home loan – which is usually tax deductible; and
* Can cost significantly less in repayments compared to repayments on a principal and interest rate home loan.
Reminder – it is important to remember that with an Interest-Only Home Loan:
* Your repayments will not pay down the principal of the home loan and increase the equity in your investment property. Instead, you will be relying on rental income and the value of your investment property increasing over time to make a profit.
* If the value of your investment property goes down, or it does not increase very much during the period of time you own the property, you could find yourself making a loss on your investment property.
Why you should arrange for a Pre-Approval
You should discuss the possibilities of your finance or mortgage broker arranging for a pre-approval as this will give you the peace of mind knowing that your finance has been assessed and to give you the assurance that your investment structure and strategy is set up correctly.
Seek Expert and Professional advice
http://www.singhfinance.com.au is a reputed Australian finance brokerage firm that employs a team of expert and professionally qualified finance brokers. Their team of expert finance brokers will help you find the right investment property home loan to meet your personal financial circumstances and investment goals. No matter what kind of investment strategy you are planning on using, Singh Finance can help you to structure your investment property home loan and choose the right home loan products to maximise your opportunities. They will obtain a pre-approved investment property home loan for you and they will even check if you need trust structures or insurance to be arranged. Call on 0424 190 908 today or visit their website and simply click on the “ENQUIRE ONLINE” form.
Disclaimer: This article is of a general nature only and does not constitute professional advice. I strongly recommend that you seek your own professional legal and accounting advice in relation to your particular circumstances.
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