Buying an investment property? Here's how to finance your acquisition.

Some investment property loan tools resi offers you to help with your property investment include:

Why pay interest only?

In general, the recommendation is to pay as much off your owner occupier home loan as possible and only make minimal repayments on your investment property loans. This is suggested on the basis that the interest on your investment property loan is tax deductible. The best way to do this is to set up your loan as an interest only home loan.

This means the minimum monthly repayments will be for interest only on the amount outstanding. The interest rate can be fixed or variable. If you don’t have an owner occupier loan, then any extra payments should be deposited into the investment property loan offset account to avoid tax problems later when you want to re-use the money.

·  Interest only options (see below)   ·  Interest in advance option (see below)   ·  Split loan facilities (see below)   ·  Free unlimited redraw

Should I fix my rate?

As an investment, sometimes the certainty of cash flow is important. A fixed home loan for investment properties will help bring certainty. However, there is a risk that you may lock yourself into a rate that can sometimes end up being than higher than the variable during the same term. With interest rates changing, there is no way to know what the short term gain or loss on interest rate is. However, if certainty of repayments is important, a fixed rate option is available.

What is interest in advance?

The tax office allows investors to pay the interest on their investment property loan, up to one year in advance. This means, that you would pay the interest that you would have paid on that property for the next financial year, before June 30 of the current financial year and hence include it as a tax deduction for the current financial year. No further repayments would be required on the investment loan for the next financial year, if it’s an interest only loan.

This is a useful tool to help you vary the taxable income for the current financial year based on your circumstances. For example, if you know that you will not be working the next financial year due to maternity leave, you can deduct the interest you would have paid, in the current financial year where you are earning a full income. This  makes it more tax effective.

Interest in advance can be at both a variable or fixed rate and can be applied to an entire investment property loan or a portion of it. Also be aware that the lump sum payment required to pay interest in advance needs to be available in the current financial year.

What are split loans?

Contact your nearest Resi branch today to find the most suitable loan for your property investment needs.  

Please seek independent financial advice from your accountant or financial advisor in regards to your investment property and the most appropriate option for your circumstances.