Property Investment Tips: What type of home loan is right for you?

By the resi financial blog team, 17 March 2014

How do I choose the right home loan

With the official cash rate resting at such a historically low level, now could be the perfect time to consider taking out an investment loan and beginning to build a property portfolio for your future. After all, investing in real estate is a great way to supplement your income and help you prepare financially for the rest of your life. 

You'll need to undertake a wide range of research to find the right investment home loan, which is an essential part of getting started on the road to property riches. Without the help of a lender, it would be necessary to save up the entire balance of a home - something that could take an exhausting amount of time to accomplish. 

Therefore, taking out a home loan is a viable option for securing property investments across Australia at the moment. Plus, with the low interest rates scattered across the property landscape right now, you could easily find a fantastic deal. 

When you're conversing with a lender, one question that could come up will be about the type of home loan you want to take out. Two of the most common types of home loans available are fixed-rate and variable-rate, and each comes with its own set of advantages and drawbacks. 

Fixed-Rate Home Loan

A fixed-rate home loan refers to the application of a measurable time period being applied to your mortgage, which secures the interest rate of your loan at a certain level for that period. 

What this offers is a degree of security, especially during times of economic turmoil. Your repayment amounts will remain the same during this period, which is great for those looking into more stable finance options for their investment ventures.

However, this security comes at the expense of some loan options. For example, the interest rates for these loans tend to be slightly higher than some other mortgages options due to their unchanging nature. Furthermore, they can also be less flexible with regards to features and facilities that can be added on.

Variable-Rate Home Loan

On the other hand, variable-rate home loans are less stable due to the possibility of fluctuating interest rates, but this is balanced by the fluidity of their additions and the potential to make major savings during your repayments. 

These loans are based on the movements of the economy, which means that if interest rates drop, so too does your repayment amount. That's why a variable-rate loan could be perfect for the current financial landscape. 

However, keep in mind that it's possible for the opposite to occur, which could result in relatively high interest charges on your repayments. Furthermore, these loans tend to have a wider range of attachments and add ons that can benefit you and your financial standing in the future. 

Categories: Personal Finance, Property Investment