Specific differences of taking an Investment Loan in Australia vs the World
Investment loans for property purchases are becoming increasingly popular as more people realize sufficient equity in their own homes to make a further investment in order to improve their quality of life.
Before you can embark on investing in a property you must first have sufficient interest in another property to enable the required security to be realized.
The first property can be either:
- your own home,
- another property or
- a combination of both.
You can still buy into an investment property however by using the investment property itself as security but in order to do this you will need to raise at least 20 per cent as a deposit, sometimes even more.
Investment loans Australia wide are primarily used to give the investor a second income stream through the rent obtained from tenants living on the property as well as providing a reasonably secure source of asset building for the future.
It is often the plan of the investor to benefit over the years from the rental payments collected and to sell the property on retirement.
Investment Loans Australia – Remain cautious.
It is wise to have your own home fully paid for before embarking on buying another property as an investment. Your own home is a major investment in your life and it should remain protected at all times. It costs you a lot of money in interest and it is easy to get in too deep if you take on both investments at the same time.
Once free of the burden of paying off your own home you can then confidently buy into an investment property and be able to better withstand any economic downturns that may see interest rates rise over a prolonged period and/or in which your investment property may be without tenants.
Investment Loans Australia – Taxation deductions.
Investment loans in Australia differ from an ordinary home loan in that the interest repayments are tax deductible as well as the following:
- All repair and maintenance costs on the property.
- Local government rates.
- Depreciation on furniture, whitegoods and cooking stoves.
Tax is attracted to the following:
- Rental income
- Capital gains.
Investment Loans Australia – negative gearing.
Negative gearing is when your investment property fails to generate sufficient income to cover the costs of managing the property as regards:
- Interest payments
- Maintenance
- Property management fees
- Rates etc.
You are then considered to be negatively geared. The benefits here is that this allows you to reduce your overall taxable income. A considerable benefit for the high earners who often find this situation worth their while knowing that the capital gain the property is earning through increasing valuation will ultimately pay dividends.
Investment Loans Australia – Factors to take into account.
It is always advisable to have the return on your investment come in higher than the costs involved to make it all happen, unless of course you wish to take the path down the negative gearing track in order to lower your taxable income. It therefore gives you two obvious but contrasting reasons to take out an investment loan,
1. to improve income.
2. to lower income.
There are however many other factors to consider when contemplating taking out an investment loan which includes:
- Stage of life
- Financial position
- Income.
All three are equally important and if you still want to proceed please contact us and we will be more than happy to further assist you. Remember that you can make use of the equity you have worked hard to build up in your own home by using it to increase your purchasing power for your investment home loan.
Investment Loans Australia – Interest only loan.
Fixed and variable interest rate loans work the same as in ordinary home loans but another loan worth considering is that of an interest only loan. This type of loan can be quite useful financially if you intend to buy your investment property on a short term basis while house prices are rising and interest rates low. The ultimate sale of the property pays off the loan and returns a profit in the form of capital growth.
Please contact us for more information on Investment Loans Australia.
Related posts:
- Interest Only Investment Loan
- Negative Gearing Tax Implications with a Commonwealth Bank Home Loan
- Investment Property Tips & Guides
- Investment Property Benefits
- Buying Investment Properties.
- No Deposit Investment Loan
- What are the different types of Investment Properties
- Refinancing Tax
- Darwin Investment Property Market 2010
- 4 Key Considerations When Buying an Investment Property
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