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Interest only loans
Ideally, investment property loans should
be interest only
because an interest only
investment loan is
FULLY
tax deductible.
Interest only loans can be fixed or variable.
It is usually the best cash flow solution when
used with good capital growth.
With an interest only loan your repayments
are set to cover the interest component of
your loan only
allowing you to keep your
repayments on your investment property
to a minimum.
Generally, interest only loans
are for a maximum five year term (depending
on your lender) reverting to a principal and
interest loan at the end of the agreed interest
only term. However a further interest only loan
can be negotiated at this time.
The interest
on your investment loan is tax deductible,
making these types of loans attractive to
investors.
Fixed rate loans
These loans are set at a fixed rate for a
specified period - usually one to five years.
Repayments do not rise or fall with interest
fluctuation
throughout the specified period.
At the end of the term you can lock in another
fixed rate, switch to variable or go for a split
loan. These loans may have limited features
and lack the flexibility of variable loans. There
may be early exit fees and limited ability to
make extra payments.
Standard variable rate loans
These loans are the most common. The
variable rate loan offers more features and
flexibility so the rate is usually slightly higher.
The extra options (for example a redraw
facility, the option to split between fixed and
variable, extra repayments and portability)
should be taken into account when choosing
your type of variable loan. Repayments vary as
interest rates fluctuate.
Offset accounts
An offset account is a savings account
attached to your loan account. Money in this
account is offset against the loan amount
thereby reducing interest payable.
Significant
savings are made by reducing compound
interest with the use of these accounts.
Other advantages of an offset account include
being able to pay off your home loan faster
than the repayment schedule demands while
being able to redraw money if the need arises.
CHOOSING THE RIGHT LOAN
Ask us for
our brochure
outlining
available loan
products.
