Investment property loans

Frequently asked questions

• What is an investment loan?

  An investment loan works like a standard home loan except that the property is not occupied by the borrower themselves. Instead, the borrower purchases the property to generate a passive income by reselling it, renting it to tenants, or both.

• What’s the difference between principal and interest repayments and interest only repayments?

  Principal and interest repayments mean that your mortgage repayments are split between paying off the principal amount you borrowed, and the interest owed.

  On the other hand, interest only loan repayments mean that 100% of your repayments are going towards paying off the interest on your mortgage and no debt reduction during the interest only period. Interest only repayments go on for a set period before the loan will automatically change to principal and interest repayments.

  Interest only repayments allow you to pay down your interest owed quickly and enjoy a lower monthly repayment for the first few years after buying the property. For your first investment property, interest only repayments may give you the breathing room you need to get tenants or start working on renovations to your future investment property.

• Is it difficult to get an investment property loan?

  Whether or not investment property loans are harder to get than home loans for owner-occupiers depends on the buyer’s financial situation. Generally, loans for a property investment have tougher lending criteria because they carry more risk.

  For example, if the buyer is planning to rely on rental income to honour their repayments, there is the risk that they won’t be able to find or keep tenants. This is why for some investment loans, buyers are required to provide evidence of their prior success owning an investment property.

• Can I use the equity in my current home to buy an investment property?

  Yes, it may be possible to use the existing equity you have accumulated in your home to finance an investment property. Contact us to discuss how much equity you can leverage when applying for one of our investment loans.

• Is it a good idea to buy an investment property?

  Buying an investment property can be a great way to set up a passive income for yourself, either by renting it to tenants or strategically selling it for a higher price at a later time. As with any financial product, there is always a trade-off, and property investors need to carefully consider their options and have a solid investment strategy.

  For example, a popular strategy for property investors is to purchase a property they predict will increase in value over time, either due to outside factors like nearby infrastructure development or because they will invest in renovations. They may then be able to sell the property for a much higher price than they bought it for later on, giving them a significant return on investment.

  It’s always a good idea to seek professional advice from a property investment consultant to weigh up your options and reduce your risk.

• What is Lenders Mortgage Insurance?

  You will usually be required to pay Lenders Mortgage Insurance on some loans when you borrow more than 80% of the property’s value (loan to value ratio). This insurance is a form of security deposit that protects the lender if the borrower is unable to make their home loan repayments.