| mortgage, investment loan | 1 Sep 2008 11:00 PM |
| Looking for an investment loan – you’ll get a better deal in Australia by talking to a mortgage bro by Michelle Kour | |
I was recently in the market to buy an investment property and checked with my bank to see what they could offer me on investment loan. I had thought that the interest rate on an investment loan would be no different to the interest rate on a home loan but I discovered that with my bank at least I would be charged a higher interest rate and fees on my investment loan than I would had I been applying for an owner occupier home loan.
I decided to check out what other lenders had to offer on an investment loan. The terms and conditions of an investment loan have really improved over the years. Back in the 1980s you could generally only get a short term 3 or 5 year fixed rate on your investment loan. This meant that at the end of the investment ,oan term you were up for further costs to extend it for a further term. Valuation and legal fees were required as well as application fees. How things have changed. Today your investment loan terms and conditions are very similar to the standard home loan. The investment loan term is often25 or 30 years with an interest only period for the first 5 years. Quite often you negotiate an extension of the interest only period on the investment loan. Most investors want an invetsment loan that is interest only particularly if they also have home loan debt. It is much better to use any surplus cash you may have to make extra principal repayments off your home loan debt and keep your investment loan repayments to the minimum – either on an interest only basis or where possible capitalise the interest.
As an investor you want to maximise the return on your investment property. Making sure your investment loan works for you is an important part of this process. For example if you are bale to capitalise interest under your investment loan then instead of using your personal savings to subsidise repayments on your investment loan you should consider capitalising the shortfall between your rent and the interest payment plus any maintenance costs, council rates etc. By capitalising the shortfall of interest on your investment loan you free up your cash flow while at the same time gaining additional negative gearing benefits. You may chose to use the cash flow for any number of things but if you apply it to making additional repayments on your home loan then that non-deductible debt is repaid much faster. Your investment loan is really working for you!
Get onto a mortgage manager and see what rates they have to offer and the type of investment loan they can structure for you. Mortgage managers are specialists in mortgage lending and a select few have considerable experience in the investment loan field. They focus on the investor market and have a wide range of excellent investment loan products to meet your needs.
I decided to check out what other lenders had to offer on an investment loan. The terms and conditions of an investment loan have really improved over the years. Back in the 1980s you could generally only get a short term 3 or 5 year fixed rate on your investment loan. This meant that at the end of the investment ,oan term you were up for further costs to extend it for a further term. Valuation and legal fees were required as well as application fees. How things have changed. Today your investment loan terms and conditions are very similar to the standard home loan. The investment loan term is often25 or 30 years with an interest only period for the first 5 years. Quite often you negotiate an extension of the interest only period on the investment loan. Most investors want an invetsment loan that is interest only particularly if they also have home loan debt. It is much better to use any surplus cash you may have to make extra principal repayments off your home loan debt and keep your investment loan repayments to the minimum – either on an interest only basis or where possible capitalise the interest.
As an investor you want to maximise the return on your investment property. Making sure your investment loan works for you is an important part of this process. For example if you are bale to capitalise interest under your investment loan then instead of using your personal savings to subsidise repayments on your investment loan you should consider capitalising the shortfall between your rent and the interest payment plus any maintenance costs, council rates etc. By capitalising the shortfall of interest on your investment loan you free up your cash flow while at the same time gaining additional negative gearing benefits. You may chose to use the cash flow for any number of things but if you apply it to making additional repayments on your home loan then that non-deductible debt is repaid much faster. Your investment loan is really working for you!
Get onto a mortgage manager and see what rates they have to offer and the type of investment loan they can structure for you. Mortgage managers are specialists in mortgage lending and a select few have considerable experience in the investment loan field. They focus on the investor market and have a wide range of excellent investment loan products to meet your needs.
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