If you are in the market for an investment loan then seek out a mortgage broker that specialises in investment loans to assist you. Many mortgage brokers focus their business around first home buyers and are not familiar with anything but the standard investment loans available in the market. Any lender will be able to provide you with a long term investment loan that allows for an interest only initial period and then converts to principal and interest.
If you speak with a mortgage broker who specialises in investment loans you will find there are significant savings and benefits to be had by carefully considering the structure of your investment loan - particularly with reference to other loans you may have.
A customer was recently refinancing his investment and home loans. Without an6y input from an investment loan specialist he applied and obtained approval for one mortgage part of which was for home loan purposes, the other being the investment loan portion. Interest rates were attractive, there was a 5 year interest only feature on the investment loan portion – all looked pretty standard.
In this example the borrower held
A home loan of $400,000
An investment loan of $505,000
The security for these loans was
A home property worth $900,000
An investment unit valued at $620,000.
Under the loan he had originally had approval for he would be
• repaying his home loan on a principal and interest basis over a 30 year period
• paying interest only on his investment loan for 5 years then converting to principal and interest.
• Interest paid on the home loan over 30 years @ 5.20% = $390,719
Having sought the input from an investment loan specialist his loans were restructured to include a home loan, an investment loan and a capitalising investment line of credit. Under this structure the investor used the investment loan line of credit to draw down against to meet any shortfall in interest on the investment loan or costs related to the investment property. By not having to subsidise the shortfall on the investment loan / property from personal income/salary he was able to apply $750 extra per month to the repayment of his home loan.
As a result:
• The home loan was repaid in just over 17 years (as opposed to 30)
• He had increased deductible interest which improved his negative gearing benefits.
• He saved $186,000 in interest on his home loan.
• He had a buffer in the investment loan line of credit to draw on in case of vacancies or unexpected expenses in relation to the investment property.
Any investor who does not seek out the input of an investment loan specialist is throwing away money. The property investment loan structure can deliver considerable savings in interest, can allow you to better manage your cash flow and also enjoy greater tax benefits through negative gearing.
The tax office in Australia has issued Tax Determinations and Private Rulings that have approved the deductibility of interest and capitalised interest on an investment loan and investment line of credit – by speaking with an investment loan specialist you will be up-to-date with this information and it will help you build wealth much faster.
Austral Mortgage makes choosing the right
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Loan for you easy. Your Choice of
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Loan will impact on your Investment Return.
