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Buying an Investment Property?

Here's how to finance your acquisition.

As you begin your search for the right investment property at the right price – you also need the top advice on how to best structure your finances – this is where resi comes in!

Resi will review your personal situation, including your other home loan and credit commitments, to help you buy an investment property. We will also look at your long term goals and provide the best solution to maximise your property investment return.

To help you with your property investment, resi has a number of loan options which include:

  • Interest only options (see below)
  • Interest in advance options (see below)
  • Split loan facilities (see below)

Why pay interest only?

Generally speaking, it's best to pay off as much of your owner occupier home loan as possible and only make minimal repayments on your investment property loans. This is suggested on the basis that the interest on your investment property loan is tax deductible.

The best way to do this is to set up your loan as an interest only home loan.

This means the minimum monthly repayments will be for interest only on the amount outstanding. The interest rate can be fixed or variable. If you don’t have an owner occupier loan, then any extra payments should be deposited into the investment property loan offset account to avoid tax problems later when you want to re-use the money.

Should I fix my rate?

As an investment, sometimes the certainty of cash flow is important. A fixed home loan for investment properties will help bring certainty. However, there is a risk that you may lock yourself into a rate that can sometimes end up being than higher than the variable during the same term. With interest rates changing, there is no way to know what the short term gain or loss on interest rate is. However, if certainty of repayments is important, a fixed rate option is available.

What is interest in advance?

The tax office allows investors to pay the interest on their investment property loan, up to one year in advance. This means, that you would pay the interest that you would have paid on that property for the next financial year, before June 30 of the current financial year and hence include it as a tax deduction for the current financial year. No further repayments would be required on the investment loan for the next financial year, if it’s an interest only loan.

This is a useful tool to help you vary the taxable income for the current financial year based on your circumstances. For example, if you know that you will not be working the next financial year due to maternity leave, you can deduct the interest you would have paid, in the current financial year where you are earning a full income. This makes it more tax effective.

Interest in advance can be at both a variable or fixed rate and can be applied to an entire investment property loan or a portion of it. Also be aware that the lump sum payment required to pay interest in advance needs to be available in the current financial year.

What are split loans?

Everyone’s situation is different. However, a split loan means that you can make portions of it interest only, fixed or variable, or pay some interest in advance. A split loan is basically a way to divide your current investment property loan into smaller loans with different features.

Please seek independent financial advice from your accountant or financial advisor in regards to your investment property and the most appropriate option for your circumstances.

Call resi on 136 126 or contact your nearest resi branch today to find the most suitable home loan for your needs.