Interest Management Loans
When it comes to how you will manage the interest on your investment loan you have more choices than simply; interest only or principal and interest? Investment loans offer a wide range of flexible interest and payment options because lenders understand that an investment loan is often in addition to your own home mortgage and even when you don’t have another home loan to manage the aim of an investment property and investment loan is to make the best possible return from the smallest outlay by you and these interest management alternatives are designed to do just that.
Cash Flow Management Loans
If the idea of negatively gearing your property doesn’t particularly appeal then consider the alternative of a cash flow management loan. These loans are also known as capitaliser structured lines of credit as they allow you to directly use your rental income to make your mortgage repayment and capitalise any difference between the rental income and the minimum monthly repayment amount on to the balance owing on your principal.
If you have a high loan to value ratio you are able to use residential property, or both residential and commercial assets as security over the loan. Cash flow management loans are also packed with another features including redraw, portability and split accounts.
You will need to be sure to remain organised and diligent using this form of a line of credit loan because you can very easily end up owing more than your investment property is worth if you continue to add to your principal balance.
Interest in Advance
When you choose an investment loan which allows you to pay your interest a full financial year in advance you often qualify for a discounted interest rate. Also when you pay the interest for the coming financial year you are able to claim back that payment sooner because you have made the payment in full and normally you would need to wait until the end of that financial year when you had made that final payment.
The interest in advance option is typically only available on a fixed rate investment loan, and you can normally choose a fixed rate term of between one year and five years. While you are able to get your investment loan repayments out of the way for a full year and qualify for a discounted interest rate you need to be sure that you can afford to pay this lump sum amount of interest at the beginning of the year because there is not usually a way to redraw the interest paid on your loan as redraw facilities apply to additional repayments from the principal loan amount.
Interest Only, Fixed Rate Investment Loan
If you are dedicated to achieving capital growth with your investment property then you are expecting it to significantly increase in value over your investment term. Therefore you can afford to make repayments of only the interest portion of your loan, leaving the principal amount to be repaid when you sell the property. If you have made the capital gains you hoped for then the sale of your investment property will be able to repay the principal loan amount in full, leaving a healthy profit for you all to use in other investments.
Interest only loans often have lower monthly repayments than principal and interest loans and because your monthly repayment is comprised solely of tax-deductible interest, interest only loans are often used by investors looking to negatively gear their properties.
When you choose an interest only option on a fixed rate investment loan you will usually have a loan term of between 1 to 5 years. At the end of that term you will need to renegotiate your interest only and fixed rate periods, or pay out the loan in full.
Interest Only, Variable-Rate Investment Loan
Very similar to an interest only option on a fixed-rate investment loan, if you’re making interest only repayments on a variable rate loan your repayments may change depending on movements by the Reserve Bank or your lender. With a variable interest rate on your investment loan you are able to enjoy times when interest rates are being cut, however you are also subject to higher loan repayments when official rates rise.
The interest only period on your variable rate investment loan will also usually only last for up to 5 years, after which your repayments will revert to a standard principal and interest loan and you may need to renegotiate with your current lender or refinance if you want to maintain interest only repayments.
For more information about the types of interest-rate available on investment loans, or for help in choosing the interest-rate which will best suit your property investment portfolio, contact Home Loan Finder now.
Related posts:
- Homeside Fixed Rate (Interest Only Mortgage)
- Westpac Fixed Rate Investment Property Loan Interest Only in Advance
- Best Investment Loans
- Interest Only Home Loans
- ME Bank Investment Loans and Interest Only Home Loans
- Interest Only Investment Loan
- Fixed Rate Interest Only Mortgage
- Members Equity SMHL Interest Only
- Beat Home Loans Fixed Loan
- NAB Tailored Home Loan – Fixed Rate (Interest Only paid in arrears)
Top Home Loans
| Home Loan | Details | Interest Rate (p.a.) | Comp Rate^ (p.a.) | App Fee / Ongoing Fee | Max LVR | Min & Max Borrowing | |
|---|---|---|---|---|---|---|---|
 Loans.com.au - Dream Catcher | A home loan offer with a $0 application fee and one of the lowest available home loan interest rates. | 5.85% | 6.21% | $0 / $375 | 80% | $50,000 / $750,000 |
 
|
 Bankwest Online Home Loan | A low interest rate home loan with a $0 application fee and ongoing maintenance fees. This offer is exclusively available by applying online. | 5.97% | 5.97% | $0 / $0 | 80% | $100,000 / $1,000,000 |
|
 Illawarra Home Loans Bank Beater Home Loan | A low variable rate, beaten down even further by 0.05% p.a. after 5 years. | 6.07% | 6.35% | $0 / $345 | 90% | $250,000 / $1,000,000 |
|
 State Custodians Mortgage Company Standard Variable Offset Loan | Awarded Mortgage of the Year 2012 – this multi-award winner features 100% offset and a loyalty 0.25% rate drop after 5 years. | 6.02% | 6.23% | $0 / $345 | 95% | $150,000 / $1,000,000 |
|
Ask A Question