Planning to invest in Australia? Learn all about investment property loans to earn maximum returns Feb 16, 2019 | Home Loan If you want to test real returns on a property, have a long-term goal, and the Australian property market has undoubtedly performed consistently well over the past decade. The returns on real estate speculations have inspired more people to consider buying property purely from an investment perspective. Check-points to tick off while choosing your investment asset: • Make a strategic decision and not an emotional one • Location is critical for you to evaluate the capital growth of the asset over the years • Can you afford the same or are you going overboard? • How easy it is to maintain since you are not going to live in it • How would the rental returns be? • Can you avail an investment property loan easily? Always remember, a good investment loan can make the process of acquiring a property for investment purposes open and stress-free to manage during the life of your investment. However, investment loans can vary in nature and you need to decide your end goal before you choose your repayment plans TYPES OF LOANS Principal & Interest This is the simplest type of loan usually used by owner occupiers who are paying the loan with the intention of eventually owning the property. Every regular payment is divided with proportions of interest and a section of the principal borrowed. You can find out the exact repayments by visiting our loan repayment calculator Interest Only Interest-only investment loans are a smart tool for property investors. Avail an interest-free investment loan if you are strategizing to gain maximum returns on investment. Variable Interest Loans If you do not plan to fix your loan, your interest rate will move with changes to market interest rates. This means the interest rate can rise or fall over the term of your loan resulting in rate changes for your repayments. 1. Advantages: • You can make extra repayments • More features such as you have unlimited redraws on any additional repayments • Easier to switch to cheaper loans or banks with better deals in the market 2. Disadvantages: • Can make budgeting harder as loan repayments can increase when interest rates change. • If you are not prepared for a rate rise you may have trouble keeping up with repayments. Line of Credit This form of credit gives the borrowers a chance to experience a sense of freedom and choice with their mortgage. Some of the key benefits you should consider while opting for finance under this type of scheme are: • The credit limit amounts are usually quite large which means you can make larger purchases without going over the limit • You can withdraw up to your credit limit without any additional approval from your lender • The interest rates are generally lower than that offered through a credit card calculator • You do have a choice to make repayments on either a monthly basis or you may not have to make a payment as long as you remain below the limit. What is an offset account? An offset account is a savings account linked to your home loan account. Offset accounts work by offsetting up to 100% of the balance of the linked savings or transaction account against the balance of the linked loan. An offset account can reduce the amount of interest you pay on your home loan. Offset accounts are much more effective if you put money in and leave it there. Commercial Loans: Such types of loans are often a necessity for several small business owners who desire to purchase their own premises. However, commercial property loans do come with their own share of regulations of borrowing and repayments. The home loan lenders will allow buyer to borrow more than 90% of a property’s market price, however, when it comes to commercial property loan, you will need to pay up more cash upfront.