Property investment is an extremely attractive investment type for Australians who love the idea of owning property on this great land of ours. While it can be a great investment it does require a lot of research and shopping around for the right home loans before you can see your dream come to fruition.
Property investors are people who buy property for investment purposes. Some may choose to rent out the property to tenants or they may renovate and then sell for a profit.
If you are in the market for an investment property, here are some tips on what to look out for when choosing the right type of investment home loans:
- Interest rates: If rates are low investors may choose to fix their home loans because it is easier to manage expenses with set repayments. Do your homework and look at what type of loan offers the lowest interest rates. Compare home loans online to find a home loan that offers an attractive interest rate and suits your needs.
- Construction loans: This type of loan is great for investors who want to build a property or plan to renovate before reselling. Unlike other types of loans were you can access 100 percent of your funds, a construction loan pays you smaller lump-sum amounts at various stages of the property being built. One major benefit of this type of loan is that you aren’t paying the builder or workers for pretty much anything that they have not completed.
- Interest-only loans: With this type of loan you pay only the interest for either a period of time or for a set loan term, so it may suit short-term property investors. After you sell the property you will need to pay the balance as a lump sum and pay out the loan. A major benefit of interest-only home loans is that investors may receive tax benefits through negative gearing. It is also helpful to manage expenses as the repayments are smaller. But this is not recommended for long-term property investors because chances are the value of the property will not increase as fast as how much you have paid in interest and owe on the home loan.
- Mortgage portability: This allows you to transfer your loan to another property, allowing you to sell one property and move it to a new one without having to refinance. This can save you on legal and application fees for switching from one loan to another.
When you find the right type of investment loan, make sure you read the product disclosure statement (PDS) before signing so that you are aware of all the fees and charges attached to the loan.