eChoice Home Loans

When it comes to making the most of an investment property, finding the right home in the right location is only half the battle; finding the best finance is other half. Many options are available and the choice of home loan will ultimately depend on your particular investment strategy and the type of property. Here are the three main choices.

1. Standard variable rate or fixed rate home loan

Depending on your circumstances, most lenders will let you borrow up to 95 per cent of the purchase price of an investment property. You may, however, be required to take out lenders mortgage insurance.

2. Interest only home loan

With an interest only home loan, repayments only cover the interest component. The principal is repaid in full at the end of the loan term (usually three to five years). Because borrowers only repay the interest component, interest only loans have lower repayments than principal and interest loans.

3. Equity home loan

If you already own or substantially own your home, you can borrow against the “equity’ your have accumulated. Equity is simply the difference between what your property is worth and what you owe. For example, if you have $200,000 to pay off on a home worth $500,000, you have $300,000 worth of equity. An equity home loan gives you a line of credit on your mortgage up to an approved amount. The loan can be taken in full or in stages, making it particularly useful for property investing.

Important extras

Loan features that may offer tax benefits or help you pay off your investment loan sooner include:

• interest in advance home loan (lets you pay next year’s interest in the current financial year, thus creating a tax deduction for eligible borrowers)
• mortgage offset account (lets you use savings and interest earned on savings to pay off the loan principal).