You might have several investment properties under your belt. Or you might just be starting out. Either way, we’re here to make sure you get an investment loan that’s going to work for you. Get in touch with our brokers in Perth today.
Why You Should Use a Broker
for your Property Investment
There’s no reason why you can’t go straight to your bank. They can calculate your borrowing capacity and get you pre-approved, just like we can.
While it’s important to pick the right property in the right location, you also need the right type of loan. Your loan setup can have a bigger impact on your returns than you may realise. Our brokers can show you your options and give you the advice you need to make the best decision.
We Give You More Choice of
Investment Loan Products and Rates
But there’s one big difference. Your bank can only offer you a very limited number of choices. When you come to us, we’ll look at loan products and rates across multiple lenders. That means we can give you a far greater range of options.
We Simplify the
Process of Investing
There’s a lot of information out there for investment property loans in Perth. We know it can be a lot to take in. With us on your side, it will get a whole lot easier. Our brokers will break it all down for you to help you make the right choices.
Want to get the ball rolling?
With Us Today
There’s never been a better time to get a great investment loan deal. If you want to get started, get in touch with Loan Monster today. Our Fremantle-based brokers are here to help.
What are the Benefits of
Purchasing in Investment Property?
Often a popular choice for many Australians, property investment is growing and can be simpler than investing in other areas such as shares, bonds, or EFTs.
With home loan rates at current record lows, you can fund your investment property using your home equity.
The ATO allows you to claim tax deductions for some of the costs associated with buying and maintaining an investment property. Some of the costs you can claim include the interest on your investment loan, landlord insurance, property management fees, and more. You can also potentially claim further deductions on your investment property through depreciation and negative gearing.
When you start thinking about investing in property, it’s a good idea to sit down with a mortgage broker to go through your options. Your investment loan can have a major impact on your returns, so it’s important to make sure you have the right loan structure from the get-go.
Please note, Loan Monsters can not legally provide tax advice and recommends you consult a registered tax agent to discuss all potential tax benefits for investment properties.
Your capital growth is the increase in the value of your property over time. This capital is the difference between the purchase price of the property and a higher current market value of the investment.
If you purchased an investment property for $400,000 five years ago, and the current market value is $650,000, your growth in capital is $250,000.
You don’t only benefit from the capital growth when you decide to sell your property, you can also use the growth as additional equity for further investments.
Investing in a property should not be with an immediate return in mind. Real estate should be considered a long-term investment.
While the market has the potential to fluctuate depending on external factors, if you’re willing to play the long game, you may be able to come out ahead in an up-market.
The longer you can commit to a property, you can build up equity and look to then purchase additional investment properties to grow your portfolio. We advise speaking with a broker and financial planner before you start to plan your first investment property.
Owning your own investment property comes with a perk of rental income. As one of the biggest benefits of an investment property, you can generate income at almost 100% certainty.
Unlike other more volatile investments, you are not subject to overnight shifts in the market that may reduce your investment amount. Tenants are locked in for a contracted time period, assuring that you will receive income during that time.
If you have an existing mortgage that you have been paying off for a little while, you will have built equity in the property. Equity is basically the difference between the current value of your home and how much you owe on it. If the property is worth $550,000 and you owe $340,000, your equity would be $210,000.
You can unlock the equity in your home and put the funds toward other purchases, like an investment property. One way to access your equity is to refinance. Your mortgage will be paid out and replaced with a new home loan that will cover the remainder of what you owe, and a portion of your equity will go towards your investment.
There is a range of strategies available to work towards making a profit from your investment.
Buy and Hold
This is based on the capital growth approach, where you buy and hold the property for a long time, hoping that the value of the property will increase over time. Then, selling for a profit.
Before your property has grown in value, you may be in a situation where the expenses of the property outweigh the income that it generates. Many investors will claim the loss as a tax deduction in those early years before they move into profit.
We suggest speaking with a registered tax agent to explore your options.
Sometimes referred to as “Flipping Houses”. Investors purchase a fixer-upper, doing a lot of the renovation work themselves (to save on costs) which then raises the value and they sell for a profit.
A similar concept to renovating and selling, passive development is less hands-on. Here you would invest the money into a project, where a property developer would complete the project, and then sell for a profit.
How Can We Help?
Investment Loans Explained
If you want to buy an investment property, chances are you’ll need a loan to do it. You may have a good chunk of cash to put toward the purchase, but it’s likely you’ll still need to borrow funds to make up the difference.
Taking out an investment property loan is fairly similar to taking out a home loan. You’ll go through the same process of finding the right loan product and submitting an application. The major difference is how you intend to use the property. As investment properties are generally seen as higher risk, they tend to have more strict requirements for approval and higher fees and charges than owner occupier loans.
A lot of the basics are the same. Both involve borrowing a certain amount over a set loan term, with interest charges and other fees that apply over the course of the loan. When applying for either loan type, you’ll have a range of options available to choose from.
On a principal and interest loan, you’ll be paying off the amount you’ve borrowed plus interest on loan repayments. With interest-only, you’ll only need to pay the interest charges.
Investors will often choose an interest-only loan as it can help to lower your mortgage repayments and could provide options for tax deductions.
Your lender will only allow you to have an interest-only loan for a set period of time before your loan will switch to principal and interest. You can look at refinancing at that time if it makes sense for you to stay on an interest-only set up.
Much like your mortgage, your loan can have fixed interest rates, variable or split interest rates. On a loan with a fixed rate period, your interest rate will be locked in at a set amount for a certain period of time. If there are any market fluctuations, you won’t be impacted.
On a variable loan, your interest rate could go up or down depending on what the Reserve Bank of Australia (RBA) decides to do with the cash rate and how your lender responds. If you opt for a split interest rate, part of your loan will be fixed, and the remainder will be set at a variable rate.
As a general rule, investment loans tend to have a higher interest rate than home loans. Depending on your situation and other loans you may have, you may be better suited to a fixed, variable or split interest rate. It’s best to get professional advice based on your finances.
Once again, just like a home loan, some investment loan products come with additional features, including offset accounts and redraw facilities.
An offset account functions like a savings account, except instead of earning interest it reduces the amount you need to pay off your loan. For example, if you have $30,000 in an offset account and a loan for $600,000, you will only be charged interest on $570,000.
With a redraw facility, you have the ability to withdraw funds from your loan to use for other purposes, but only if you have already made extra repayments ahead of time.
Lenders have to follow strict guidelines for investment lending. Unlike a home loan where you can still get approval with a low deposit, investment loans tend to have lower Loan to Value Ratio (LVR) requirements.
LVR is basically the difference between how much you’re borrowing and how much you’re putting up for a deposit. So, if you want to purchase a property worth $500,000 and you’re contributing $100,000, your LVR would be 80% as your deposit is 20% of the total. Higher LVRs of 90% or 95% mean the deposit is 10% or 5% of the total amount being borrowed.
With lenders, everything is dependent on risk. As a higher LVR means more risk, a lender will be less likely to approve an investment home loan without a healthy deposit. Your loan deposit could come from your own savings, or if you already own property, you could access your equity.
Investment Loan Brokers
It doesn’t matter whether you’re a seasoned investor or a first timer. At Loan Monster, we’re here to help investors of all levels. We’ll take the time to understand your situation and recommend the best options for you. If you’d like to have a chat with one of our brokers, get in touch with us today. We’ll get back to you within 24 hours, even on weekends.