Investment property loans offer unique features designed specifically for those looking to build wealth through real estate. Understanding these features is crucial for pharmacy assistants considering their first investment property or expanding their property portfolio.
Understanding Investment Loan Basics
When you're buying an investment property, investment loan options from banks and lenders across Australia vary significantly from standard home loans. These loans recognise that your rental property loan serves a different purpose - generating income through rental yield rather than providing shelter.
The key difference lies in how lenders assess your borrowing capacity. They consider projected rental income from your investment property, which can strengthen your application. However, most lenders only count 75-80% of expected rental income due to vacancy periods and maintenance costs.
Interest Rate Options and Features
Investment Loan Interest Rate structures typically offer both variable interest rate and fixed interest rate options:
- Variable rates: Fluctuate with market conditions and often provide more features like offset accounts
- Fixed rates: Lock in your rate for a set period, providing certainty for calculating investment loan repayments
- Split loans: Combine both fixed and variable portions for balanced flexibility
Many lenders offer interest rate discounts based on your loan amount, loan to value ratio (LVR), and relationship with the institution. Pharmacy assistants may access professional package discounts through their employment status.
Loan to Value Ratio and Deposit Requirements
The LVR for investment properties typically caps at 80-90%, meaning you'll need a minimum 10-20% deposit. Higher deposits can help you:
- Avoid lenders mortgage insurance (LMI)
- Access better interest rates
- Increase your borrowing capacity for future purchases
When research property options, remember to factor in additional costs like stamp duty, which varies by state and is generally higher for investment properties.
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Book a chat with a Finance & Mortgage Broker at Pharmacist Home Loans today.
Property Types and Investment Options
Investment loans accommodate various property types:
- Stand alone dwelling: Often preferred for capital growth potential
- Town house: Balance between land content and affordability
- Apartment: Lower entry point but consider body corporate fees
Each property type affects your rental yield calculations and long-term property investment strategy. When buying a rental property, location and tenant demand significantly impact your investment success.
Loan Features Specific to Investment Properties
Investment property loans often include features that support your property investment strategy:
Interest-Only Payments: Allow you to pay only interest for a set period (typically 1-5 years), maximising negative gearing benefits and improving cash flow.
Offset Accounts: Some lenders offer 100% offset facilities, though these may come with higher interest rates.
Redraw Facilities: Access to additional payments made, providing flexibility for property maintenance or further investments.
Professional Packages: May include discounted rates, fee waivers, and bundled products like credit cards or transaction accounts.
Application Process and Documentation
Applying for a investment loan requires comprehensive documentation. The streamlined application process typically includes:
- Recent pay slips and employment verification
- Banks statements for the past three months
- Tax returns (especially important for negative gearing claims)
- Property purchase contract or property details
- Rental appraisals for income projections
Your investment loan application will be assessed based on your ability to service the loan from your salary, considering the rental income as additional support.
Negative Gearing and Tax Considerations
Negative gearing occurs when your rental income is less than your property expenses, including loan repayments. This creates a tax deduction against your salary income, which can be particularly valuable for pharmacy assistants in higher tax brackets.
However, ensure your property investment strategy isn't solely tax-driven. Focus on properties with strong capital growth potential and sustainable rental demand.
Building Your Investment Property Portfolio
Once you've successfully purchased your first investment property, many investors look at expanding their property portfolio. Each additional property becomes easier to finance as you build equity and demonstrate successful property management experience.
Consider how each property fits your overall investment strategy. Some investors prefer to invest in real estate in growth areas, while others focus on high-rental-yield properties in established suburbs.
Refinancing and Review Options
The property market and your circumstances change over time. Regular reviews of your investment loans ensure you're accessing competitive rates and features. Investment loan refinancing can help optimise your portfolio performance.
Many pharmacy assistants benefit from professional advice when expanding their property portfolio or considering equity release loans to fund additional investments.
Investment loans offer powerful features for building long-term wealth through property. Understanding these features helps you make informed decisions about your property investment journey. From interest rate structures to tax benefits, each element plays a role in your investment success.
Whether you're considering your first investment property or looking to expand your portfolio, professional guidance ensures you access the most suitable loan features for your circumstances.
Call one of our team or book an appointment at a time that works for you to discuss your investment loan options.
