Promoted by loans.com.au
Any investor worth their salt will know that it’s important to find an investment loan with a low interest rate. While a competitive interest rate is certainly an important thing to have, there are many other features investors should look for in an investment loan.
Here are some of the most important features to look for in an investment loan.
Interest only repayments
Most standard home loans have principal and interest (P&I) repayments. But some savvy investors want the option to pay interest only on their investment loan as it means lower repayments, freeing up cash flow for other investment opportunities.
On top of that, interest is tax-deductible. According to the Australian Taxation Office (ATO), if you’re buying an investment property to use as a rental, you can claim interest charged on the loan.
Flexibility on how to repay the loan
Making more frequent repayments can also help you pay the loan off sooner. For example, making fortnightly repayments allows you to make an extra month of repayments, as there are 26 fortnights in a year, which is equivalent to 13 months.
Another important feature to look for in an investment loan is an offset account, which can be used to replace your everyday banking account and comes with its own debit card that you can use to withdraw money and pay for regular purchases.
An offset account works like a savings account where you can stash extra funds. The balance in your offset account is counted towards your principal loan amount which reduces the interest charged on the loan. Investors can kill two birds with one stone by using an offset account: they reduce the interest they pay while saving up enough to fund another investment or a renovation.
Property investment isn’t cheap, so it’s important to be mindful of all the costs involved and look for an investment loan with minimal fees. When you’re shopping for an investment loan, ask the lender for a product brochure that should outline all the fees that the loan has. Make sure to ask the lender which fees can be paid upfront.