Understanding Investment Loan Features
When buying an investment property, understanding the specific features of investment loans is crucial for making informed financial decisions. Investment property loans differ significantly from owner-occupier home loans, with unique characteristics designed for rental property investments.
Interest Rate Options and Structures
Investment loans typically offer both variable interest rate and fixed interest rate options. Variable rates fluctuate with market conditions, while fixed rates provide certainty for a specified period. Many lenders offer interest rate discounts for larger loan amounts or established investment property portfolios.
Calculating investment loan repayments requires consideration of:
• Principal and interest repayments
• Interest-only payment periods
• Rental yield projections
• Tax implications including negative gearing benefits
Loan to Value Ratio Considerations
The loan to value ratio (LVR) represents the percentage of the property's value you're borrowing. Investment loans often require lower LVRs than owner-occupier loans, typically capped at 80% to avoid lenders mortgage insurance (LMI). Higher LVRs may be available but usually incur additional costs.
Property Types and Investment Options
Lenders assess different property types differently when determining loan amount and terms:
- Apartments - Often face stricter lending criteria in high-density areas
- Town houses - Generally viewed favourably by lenders
- Stand alone dwellings - Typically offer the most flexible lending options
Application Process and Documentation
The investment loan application process requires comprehensive documentation including:
• Recent bank statements (usually three months)
• Income verification documents
• Details of existing investment property portfolio
• Research property documentation and contracts
A Finance & Mortgage Broker can provide access to investment loan options from banks and lenders across Australia, offering a streamlined application process compared to approaching lenders individually.
Borrowing Capacity Assessment
Lenders assess borrowing capacity differently for investment loans, considering:
• Rental income potential (usually calculated at 75-80% of expected rent)
• Existing debt commitments
• Living expenses and financial obligations
• Property investment strategy and experience
Additional Costs and Considerations
Buying a rental property involves various costs beyond the loan amount:
• Stamp duty (varies by state)
• Legal and conveyancing fees
• Building and pest inspections
• Ongoing property management costs
Investment Loan Features for Portfolio Growth
Experienced investors often utilise specific property investment loan features:
- Offset accounts - Reduce interest payments while maintaining liquidity
- Redraw facilities - Access additional equity for future investments
- Split loan facilities - Combine fixed and variable rate portions
- Cross-collateralisation - Use existing property equity for new purchases
Working with Finance & Mortgage Brokers
Finance & Mortgage Brokers specialising in investment properties offer valuable expertise in:
• Comparing investment loan options across multiple lenders
• Understanding property market lending criteria
• Structuring loans for tax efficiency
• Managing the application process for your first investment property
Choosing the Right Investment Loan Structure
Your property investment strategy should align with your loan structure. Consider factors such as:
• Investment timeline and goals
• Cash flow requirements
• Tax position and negative gearing benefits
• Future borrowing plans
Professional advice helps ensure your investment loan application aligns with your broader financial objectives while maximising potential returns from your rental property investment.
Call one of our team at Wagstaff Finance or book an appointment at a time that works for you to discuss your investment loan requirements and explore suitable options for your Sunnybank property investment goals.
