If you’re looking into investment loans, there’s a fair chance you’ve already come a long way in your investment property journey. You’ve confirmed that investing in property is suitable for you by doing adequate research. You’ve investigated different locations and property types. Perhaps you’ve even chosen your desired property. Now you’re ready to take the final step, to take out an investment loan and put your name to a property.
Importantly though, there’s no one-size-fits-all option when it comes to taking out an investment loan. In fact, there’s a variety of loan types that all deserve your consideration. How do you choose the right one? Here are a few key things for you to think about.
When it comes to investment loans, a loan from a well-established organisation, such as a BOQ Home Loan, is usually the safest option. With something as important as your financial future, it’s important that your lender is a company you feel comfortable putting your trust in, which means you should ensure that your chosen institution has adequate experience and expertise in this field.
Your Future Finances
Nobody can predict the future, but it is possible to estimate likely scenarios. If your career pattern so far suggests that your income will probably remain steady or increase during the years while you’re repaying your investment loan, you’ll probably favour either a standard variable rate or a fixed rate.
A standard variable rate gives you the freedom to contribute extra money towards repaying your loan during particularly lucrative times. A reliable income lines up well with this type of loan because it should ensure that repayments always fit into your budget, even if rates fluctuate.
A fixed rate might sit more comfortably with you if you’re happier knowing things in advance or you’re concerned that an unfavourable change to interest rates could throw an unmanageable spanner in the works. The core benefit of a fixed rate is that it allows you to accurately plan all your repayments, though this comes at the price of a fixed term, which can be costly to shorten should you find yourself able to pay off the loan quicker than anticipated. If you’re divided between these two options, you could also consider a split loan, part variable and part fixed.
Your Current Situation
Are you an employee right now or do you work for yourself? If you’re self-employed, you might find it more difficult to secure a regular investment loan as your income may be viewed as less stable, even if you currently have a consistent cash flow. If this is the case, a low doc home loan might be ideal for you. You won’t be required to provide as much evidence of your income, however, you are likely to face a higher-than-usual interest rate.
If your current situation features a reasonable income but hasn’t yet left you with enough savings to make a full deposit, consider a no deposit or low deposit loan. This is most likely to work out for you if you have a family member willing to use their own property as equity to support your loan. There is, of course, a risk inherent to this type of loan, but being able to move in sooner rather than saving for several extra months – or years – is a benefit worth taking into account.
The key factors that will influence your decision include how you envision your financial future, your personality and tolerance for risk, and your existing circumstances. If in doubt, don’t be afraid to consult with an expert to get some professional advice; an investment in ensuring you make the right decision now could save you a lot of money – and regret – in the long term.