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Investment Loan Information

Investment loans in Australia were once different to other loans in that they were usually a higher interest rate product. The deregulation of the mortgage industry and the subsequent frenzy of competition has ensured that almost all lenders now offer investment loan products that are on the same interest rate as loans for private/domestic purposes.
If an investor is borrowing to fund an investment purchase (property, shares etc) then those borrowings are tax deductable. If they also have existing personal borrowings like a loan that's purpose was to purchase their owner occupied home then the most common type of investment loan sought is one with interest only repayments because the investor can then pay off their personal purpose borrowings faster while keeping their investment borrowings, and their tax deductable interest, high for as long as possible.
Line of Credit facilities are usually 'evergreen' (unspecified loan term and no amortisation schedule) and can therefore be interest only for an unspecified term. This makes them a popular choice for many investors.
Most other types of loans amortise (principle reduction) over a set 30 year term instead. These usually offer a maximum interest only period of five years from the start of the loan (settlement) however some lenders will go as high as 15 years depending on the financial position of the applicant. In such cases the interest only repayments automatically revert to principle and interest repayments after the nominated interest only period and the loan then begins to amortise.
The interest only period on an amortising mortgage is only available at the very beginning of the loan and must be nominated by the borrower prior to settlement. Many investors take advantage of a 5 year interest only period with one lender and then refinance so that they can get another interest only period. Quite often interest only is used in conjunction with a fixed interest rate period as many investors like to plan ahead and appreciate the security of a regular repayment amount.
The choice of investment loan is determined by the available interest rate & features of the loan and the needs of the investor, e.g. do they require an interest only period and if so how long?

Call or email for lender's comparison rate schedules or specialised Mortgage Software generated comparisons that details relevant features of competing loan products side by side and also gives an AAPR (average annual percentage rate) which is an indication of the 'true' cost of the loan over a seven year term.

The above Investment Loan content is information only and should not be construed as financial advice.

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