Understanding Investment Loan Features
When you're looking at buying an investment property in Brisbane or anywhere across Australia, understanding the specific features of investment loan products can make a significant difference to your property investment strategy. Investment loans come with unique characteristics that distinguish them from standard home loans, and knowing these features helps you make informed decisions about your property investment finance.
Investment loan features are designed to support property investors in building wealth through real estate. These loans typically offer different interest rate structures, repayment options, and tax benefits compared to owner-occupier loans. The right investment loan can help you leverage equity effectively while maximising your rental income potential.
Interest Rate Options and Structures
One of the most important investment loan features to consider is the interest rate structure. You'll typically have access to both variable rate and fixed rate options:
• Variable interest rate: Fluctuates with market conditions and often includes rate discounts
• Fixed interest rate: Locked in for a set period, providing repayment certainty
• Split loans: Combine both variable and fixed portions for balanced risk management
Investor interest rates are generally higher than owner-occupier rates, but many lenders offer interest rate discounts for investors with strong financial profiles or larger loan amounts. When calculating investment loan repayments, consider how different rate structures align with your property investment strategy and risk tolerance.
Repayment Structure Flexibility
Investment loan products typically offer two main repayment structures:
Interest Only Investment Options
With interest only repayments, you pay only the interest component for a specified period (usually 1-10 years). This feature:
• Reduces monthly repayments during the interest-only period
• Can improve cash flow from your rental property
• May help with negative gearing benefits
• Allows you to use available funds for other investments
Principal and Interest Repayments
Traditional repayment structure where you pay both interest and principal:
• Builds equity in your investment property over time
• Generally results in lower total interest costs
• Provides a clear path to property ownership
Loan to Value Ratio (LVR) Considerations
Most investment loans allow borrowing up to 90% of the property value, though some lenders may go higher. The LVR affects:
• Your required investor deposit (typically 10-20% minimum)
• Whether you'll need Lenders Mortgage Insurance (LMI)
• The investment loan amount you can access
• Your overall investor borrowing capacity
Ready to get started?
Book a chat with a Finance & Mortgage Broker at LBK Lending today.
Tax Benefits and Deductions
Investment loan features often support various tax advantages:
• Negative Gearing Benefits: When property expenses exceed rental income, you may claim the loss against other income
• Claimable Expenses: Interest payments, property management fees, maintenance, and depreciation
• Maximise Tax Deductions: Proper loan structuring can optimise your tax position
Consult with a tax professional to understand how these features apply to your situation and ensure you're maximising available deductions.
Access to Multiple Lenders and Products
Working with a mortgage broker gives you access to investment loan options from banks and lenders across Australia. This means:
• Comparing features across different investment loan products
• Finding lenders who specialise in property investor loans
• Accessing wholesale rates that may not be publicly available
• Getting expert advice on which features suit your investment goals
Portfolio Growth Features
Many investment loans include features designed to support portfolio expansion:
• Equity Release Options: Access equity from existing properties for future purchases
• Line of Credit Facilities: Flexible access to approved funds
• Cross-Collateralisation: Use multiple properties as security (though this requires careful consideration)
• Offset Account Features: Some lenders offer offset accounts for investment loans
Refinancing Investment Loans
Investment loan refinance options allow you to:
• Switch between interest rate types
• Access additional funds for property improvements or new purchases
• Consolidate multiple investment properties under one facility
• Take advantage of changed circumstances or improved rates
Regular loan health checks can identify refinancing opportunities that improve your investment returns.
Application Process Considerations
The investment loan application process focuses on:
• Your ability to service the loan from income (rental income is typically calculated at 80% to account for vacancy rates)
• Your existing property portfolio and debt commitments
• The investment property's rental potential and location
• Your overall investment strategy and experience
Building Long-term Wealth
The right combination of investment loan features supports your goal of building wealth through property investment. Consider how each feature aligns with your strategy for creating passive income, achieving financial freedom, and growing your property portfolio over time.
Remember that property investment involves ongoing costs like body corporate fees (for units), stamp duty, ongoing maintenance, and potential vacancy periods. Factor these into your investment calculations alongside your loan features.
At LBK Lending, we understand the Brisbane property market and can help you access investment loan options that align with your wealth-building goals. Our team works with multiple lenders to find investment loan products with features that support your specific investment strategy. Call one of our team or book an appointment at a time that works for you to discuss your investment loan needs.
