Property investment can be a great way to build life-changing wealth, because you:
– Can use leverage to your advantage
– Have the opportunity to experience long-term price and rental growth
– Might be able to benefit from potential tax breaks.
– Work with one of the best mortgage advisors in Australia
– Find some of the best mortgage deals in the market
That’s where Breakthru Home Loans comes in.
Over the years, we’ve helped many clients settle on investment property loans and secure some of the best investment home loan rates in Australia. Also, our director and lead mortgage broker, Sashi Sen, is a very experienced property investor, who tries to find the best investment loan rates for her own portfolio.
Arguably the most important element of taking out a home loan for investment property is choosing the correct structure. Investment loan structure can involve:
– How the loan is secured
– The type of interest rate (i.e. principal and interest or interest-only)
– The loan’s features (such as an offset account)
When property investment loans are structured correctly, you have the chance to potentially refinance your home loan a few years later, borrow against the equity you’ve hopefully built up, and use those funds as the deposit on another investment property.
You can potentially repeat that tactic multiple times, and thereby build a property portfolio.
But when property investment loans are not structured correctly, you might find it harder to refinance your home loan and fund your next investment loan deposit.
So even though everyone wants to find some of the best mortgage deals or best investment home loan rates, that’s arguably less important than organising a sound structure.
Don’t worry if the concept of investment loan structuring is confusing. A skilled mortgage broker, like Breakthru Home Loans, can explain it all to you in plain English and provide expert recommendations.
As previously mentioned, one of the key things to decide with investment property loans in Australia is what type of interest rate to choose. You have two options:
This will have a higher initial cost than an interest-only investment loan, as you will not only have to make interest payments but will also have to start repaying the principal (i.e. the amount of money you borrow) from day one. However, P&I property investment loans have a lower total cost over the life of the loan than IO property investment loans. Also, your repayments will be more consistent, which will make budgeting easier.
This will have a lower initial cost than a principal-and-interest investment loan, as you won’t have to repay the principal during the interest-only period. That can improve your cashflow in the short-term, which may help you save more quickly for a deposit on another home loan for investment property. But once the IO period ends, you will have to repay the entire principal, and in a shorter amount of time; and because your principal will be higher for longer, you’ll be charged more interest over the life of the loan. Also, once the IO period ends, your repayments will significantly increase, which will make budgeting harder.
Again, choosing the type of interest rate is arguably more important than searching for the lowest investment loan rates in Australia, because it will probably have a bigger impact on your long-term financial future.
Before you start looking for an investment property, it’s important you speak to your mortgage broker about a pre-approval for a home loan for investment property.
Your mortgage broker will compare investment loans on your behalf, try to identify some of the best investment loan rates for your individual situation, and present you with a shortlist of suitable lenders and investment property loans.
Once you’ve chosen your preferred option, your mortgage broker will apply for the pre-approval. Assuming it comes through, you’ll know your maximum purchase price.
There’s a second important thing you need to do before starting the home-hunt – which is to choose the location.
Over the long-term, where you buy is likely to have a greater influence on how much price and rental growth you enjoy than the specific property you buy.
So location research is vital. There are two approaches you can take:
Buying an investment property can be a great way of building wealth and securing your financial future – provided your investment loan is structured in the right way.
Our experienced mortgage broker team can help you get a suitable investment property loan, with a competitive interest rate.
If necessary, we can also help you refinance your home loan to tap into any equity you might have.
Looking for a home loan for investment property? Get in touch with us today.
