Investment home loans offer specific features to help you get the most out of your investment property.

Learn more about home loans for investment property, before u loan.

What are investment home loans?

Investment home loans are mortgages specifically designed to finance the purchase of an investment property, such as a rental home or a property intended for capital growth. These loans are distinct from owner-occupied home loans, as they cater to the unique needs of property investors.

What features can I get on an investment home loan?

Investment home loans offer various features, providing flexibility and potential benefits:

  • Interest-only repayments – Investors often choose interest-only loans, allowing them to pay only the interest portion of the loan for a specified period, typically 1 to 5 years. This can free up cash flow for other investments.
  • Additional repayments – Some loans permit extra repayments, allowing you to pay down the principal amount faster.
  • Redraw facility – a redraw facility allows you to access additional repayments you've made, providing financial flexibility.
  • Offset account – linking an offset account to your loan can help reduce the interest you pay. Any funds in the offset account are deducted from your loan balance when calculating interest.
  • Fixed or variable rates – choose between fixed or variable interest rates, depending on your preference for rate stability or potential for lower rates.

In Australia, lenders typically require a larger deposit for investment properties compared to owner-occupied homes. The standard deposit for an investment property is around 20% of the property's purchase price. However, it's essential to consult with lenders and mortgage brokers, as some may accept a smaller deposit under specific conditions.

Investment home loans often carry slightly higher interest rates than owner-occupied loans due to the increased risk associated with investment properties. These rates can vary among lenders, so shopping around is essential to secure a competitive rate.

What is a good investment loan interest rate?

The interest rate for investment loans varies depending on market conditions, the type of loan, and the lender. A competitive rate is one that aligns with your financial objectives and minimises your overall borrowing costs. It's advisable to consult with mortgage brokers to find the best rate tailored to your situation.

Can I get an interest-only investment home loan?

Yes, interest-only investment home loans are available and are popular among property investors. These loans allow you to pay only the interest component for a specified period, providing flexibility in managing cash flow. However, they require careful consideration, as you won't be reducing the principal debt during this time.

Things to look out for when choosing an investment home loan

  • Loan terms – Choose a loan term that aligns with your investment strategy and financial goals.
  • Loan fees – Assess application fees, ongoing fees, and any other associated costs.
  • Rate type – Decide between fixed or variable rates, considering your risk tolerance and market conditions.
  • Additional features – Evaluate the availability of features like offset accounts, redraw facilities, and extra repayment options.
  • Tax implications – Consider how the loan structure may impact your tax situation and seek advice from a financial advisor.

Whether you're drawn to the flexibility of interest-only repayments or the potential benefits of offset accounts, it's vital to align your loan with your investment strategy. Seek the guidance of a mortgage broker who can navigate the nuances of investment loans.

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