Here are three things you can do to find the right loan.
1. Lenders often have stricter rules for investment loans so make sure you do your homework. Be sure to know the max LVR of the loan you’re applying for. This affects your deposit size.
Many investor loans have deposit sizes of 20% but some require a deposit of 30% and you can also find some as low as 10%. You also need to know the difference between fixed and variable rate loans. Fixed rates are generally more stable and variable rate loans have more options and flexibility.
2. The second thing every property investor needs is a strategy and your strategy will determine the type of loan you apply for. Many investment loans interest only.
This means you make smaller repayments in the beginning as you only pay off the interest. This can be a good strategy if you’re confident that the property you’re buying will quickly grow in value. A safer approach is to buy a property, hold it for a long time and watch it slowly grow in value. With this strategy, you’re better off with a principal and interest loan. Here you make your repayments on both the interest and the principal.
It’s a safer, slower strategy. But what if you already own property? Then you have another option. You can use the equity in your house to fund your investment. Equity means the value of your property minus any money that you owe and with a line of credit loan, you can use that equity to fund an investment.
3. The last thing you need to do is look for an investment loan with a good interest rate. Typically investment loans have higher interest rates but now the market is very competitive. You should be able to find an investment loan with a reasonable rate as long as you compare all your options. Property investment is an exciting path to wealth but it’s far from risk-free.