Investment loans explained

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Investment loans to unlock wealth

As more and more Australians seek to build wealth through investments, particularly through purchasing an investment property, investment loans are becoming a popular option. Investment home loans are essentially loans that are exclusively designed to fund investment property purchases – and they differ from other home loans in a number of ways. If you’re considering purchasing an investment property, it’s important to understand the differences between an investment home loan and a residential home loan so you know what to look for when you’re shopping for a product.

 

Home loan deposit amount

A big difference with an investment home loan is the amount of deposit you will be expected to put down. You may find that some banks are willing to lend with a 10% deposit, however it is far more common to see investment home loan products requiring a 20–30% deposit. Remember, if you are paying less than a 20% deposit on a property purchase, you will need to pay lenders’ mortgage insurance, which could add thousands to your overall bill.

 

Interest-only repayments

An excellent feature of investment loans if that they come with an interest-only repayment option. This is where you only pay back the interest on your loan and means your payments will be a lot more affordable. However, you will not be paying off any of the principle on your property, so you will need to pay back the whole loan at the end of the term – usually this is done by selling the property. This may not seem logical, but interest-only repayments are a great option for investment properties in high growth areas where you could gain significant equity in house price growth.

 

Interest rates

Many investment home loans come with a slightly higher interest rate than residential home loans. It depends on the loan product you are looking at, but generally investment home loan rates can be around 0.5% more expensive – which is significant over the lifetime of a loan. It’s important to shop around for the best deal, a Reventon expert will be able to help.

 

Fees and costs

Like a number of home loans, an investment loan comes with a number of fees and costs involved – this includes an establishment fee, an early exit or break fee, and administration fees. Before you take out any loan, you should be aware of all the fees you will be expected to pay, as they could run up a large bill.

 

Seek advice for your investment home loan

Even with plenty of knowledge about investment home loans, it is almost always beneficial to get advice. A Reventon expert will be able to discuss your current financial circumstances and requirements to help you find the right loan – they will also be able to answer all of your questions and guide you through the whole process.

 

So whether you are just starting out on your property investment journey or you are actively looking for an investment loan, you can get a free financial advice session with a Reventon expert to help you on your way. Book your consultation today.

 


 

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