Investment Loan Advice
Investment Loan Advice
We assist a wide range of property investors from first time investors through to seasoned investors who manage a significant property portfolio. Irrespective of how much investing you intend to do it is important to get the right advice before you begin. Writing an investment plan and being clear on your investment goals can also assist greatly in getting the best outcome. This section explores some of key considerations with property investing and choosing the right loan for your situation.
Our investment approach
With property investors we will typically focus on
- Finding the right loan structure.
- Finding the right type of loan.
- Finding the best deal.
Loan structuring considerations include the use of cross-collateralisation, which is explained in Second Home and Bridging Loans. The advantages and lending guidelines for different ownership structures, such as owning property in a personal name or owning a property in a trust or company structure. This is explained further in Trust and Company Home Loans. The advantages and disadvantages of interest only investment loans which are explained further below.
It is critical that we consider loan structuring first. For example if you decide that you wish to buy investment properties in a trust structure then straight away a number of lenders cannot be considered because they do not offer investment loan finance using this structure. That is why we will focus on the big picture first. We will also consider your plans for the future and what you wish to do right now.
Getting Started
It is important to consider your goals, financial strategy and your budget for property investing. Certain types of property may have a greater chance of providing capital growth in the long run and other types of property may provide higher yielding rent returns. Some type of properties may have more time or money required for maintenance work and you should consider if this suits your situation or if there are investments that are more suitable. We can provide recommendations of books and resources that can help you educate yourself in this area. We can also work with you to map out the income and expenses that any investment property may incur.
Getting Started
It is important to consider your goals, financial strategy and your budget for property investing. Certain types of property may have a greater chance of providing capital growth in the long run and other types of property may provide higher yielding rent returns. Some type of properties may have more time or money required for maintenance work and you should consider if this suits your situation or if there are investments that are more suitable. We can provide recommendations of books and resources that can help you educate yourself in this area. We can also work with you to map out the income and expenses that any investment property may incur.
Ready to get started? Call a mortgage specialist from OAK Tree Finances today on 0404 403 066 and we’ll find the perfect home loan for you.
Interest Only Investment Loans
An interest only investment loan requires the borrower to repay the monthly interest costs and loan fees. The borrower is not required to repay the principal of the loan which will mean that your loan balance will not reduce. This will assist with the affordability of an investment loan and may also free up cashflow to assist with personal expenses or further investments.
Another common strategy can be explained with the example of a property investor that has a home loan and an investment loan. If an interest only repayment option is chosen on the investment loan (rather than P&I on both loans) then this can increase the available money to make additional repayments on the home loan. This strategy is beneficial as the debt on the home loan is being reduced more quickly (this debt provides no tax benefits) and the debt on the investment property stay the same (this debt provides tax benefits). In other words you repay the debt that provides no tax benefits before you focus on the other debt.
This strategy can work well to reduce your overall debt more quickly providing you use the extra money to make additional repayments on your home loan. Unfortunately, some investors do not put the extra money on their home loan. Instead they pay of their home at the normal rate and 5 or 10 years later may not have reduced the balance of their investment. This means that they have actually reduced their overall debt more slowly than if they had made principal and interest repayments on both loans.
Interest only can be used as an effective strategy but it is important you consider why you are doing this and what your goals are. It can assist with certain strategies but at the same time property investors can get themselves over exposed with debt where they cannot afford to reduce the principal.
Lets Get Started!
Ready to get the best in mortgage finance? Make an appointment or call us on 0404 403 066 to discuss your unique circumstances today.