Investment loans

What is the right type of property investment loan?

Unlike home loans for owner-occupied properties, the borrowing options associated with investment loans are much more aligned with wealth creation, tax and interest minimisation strategies.

To help achieve these objective, there are a wide range of investment home loans to select from, including:

• Line Of Credit
• Fixed Rate - Interest Only - Annually in Advance
• Fixed Rate - Interest Only - Monthly in Arrears
• Variable Rate - Principal & Interest
• Variable Rate - Interest Only
• Fixed Rate - Principal & Interest
• Interest Capitalisation or Cash Flow Management Loans
• Superannuation Fund Loans
• Commercial Bills
• Margin Loans

When looking at investment loan options, you should always take the advice of your accountant and/or financial planner first, then speak to an experienced finance broker like mortgagebroker direct to source and implement the appropriate financing solution.

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Property Investment Loans - Tax Structuring Considerations

When thinking about investing in property, it's important to have a sound knowledge of the tax issues and how to properly structure a property investment loan. Depending upon how a property investment loan is structured, the interest payable can significantly effect the net taxable income position of the borrower.

Many property investors "negative gear" investments such that a net tax loss is generated, thereby reducing the net taxable income of the borrower. There are inherent risks associated with borrowing to fund investments and whilst gearing can help to increase the return on borrowed funds, losses can be significant in adverse circumstances.

As a general rule, only investors with the financial capacity to absorb potential falls in investment values and/or any increased cost in interest payments, should consider negative gearing. And the advice of your accountant and/or financial planner should always be sought prior to proceeding.

Property Investment Loans - Cashflow Considerations

Cashflow, especially the ability to consistently meet repayments when they fall due, is critical to the success of property investment and careful planning is required.

There are property investment loan products available that allow the capitalisation of interest and/or costs not covered by the rental income for a period of up to 7 years, therefore making an investment property purchase effectively cash-neutral.

This type of property investment loan product relies on continually rising property values so it is important to always seek the advice of your accountant and/or financial planner before proceeding. An experienced mortgage broker like mortgagebroker direct should also be consulted when it comes time to sourcing a loan.