“An investment home loan is tailored for buying property to generate income, not for your primary residence. Perfect for acquiring rental properties or those with strong potential for value growth, these loans open doors to earning and building wealth!

“Choosing the right investment home loan is key to maximizing your returns and managing your finances. Here are five common types of investment loans to consider:

• Principal and Interest Loan: Pay both the principal and interest, reducing your debt while building equity over time.
•  Interest-Only Loan: Pay only the interest for 1-5 years, keeping initial repayments low—ideal for those focusing on capital growth.
•  Fixed-Rate Loan: Lock in a fixed interest rate for stability and predictable repayments, protecting against rate hikes.
•  Line of Credit Loan: Access funds up to a limit, paying interest only on what you use—perfect for flexible investment expenses.
•  Split Loan: Divide your loan into portions with different rates (fixed or variable), giving you the best of both worlds.

“Wondering if you qualify for an investment home loan? Here’s what you’ll need:

• Genuine savings: Typically, 5%-10% of the property price.
•  Equity in other properties: If borrowing over 90%, lenders may want to see equity in additional properties (for seasoned investors).
• Good credit history: A solid track record matters!
• Above-average credit score: Lenders look for strong financial health.
• Stable employment: Consistent income is key.

“Curious how much you can borrow for an investment property?

You can typically borrow up to 95% of the property’s value, though this may require Lenders Mortgage Insurance (LMI). If you have a guarantor or use equity from another property, you could potentially borrow more than 100% of the property’s value!

Thinking about applying for an investment home loan? Here’s a quick guide to the approval process:

• Pre-Approval: Get pre-approved before you start house hunting. This helps you understand your borrowing power and strengthens your offer when purchasing.
• Documentation: Once you’ve found your property, gather your financial documents—proof of identity, income, and current debts.
• Loan Application: Submit your formal application with all financial and property details.
• Property Valuation: The lender will assess the property’s value to ensure it matches the loan amount.
• Assessment & Approval: The lender reviews your application and the property valuation. If everything checks out, you’ll receive formal approval.
• Conditional Approval: Sometimes, approval comes with conditions that need to be met before finalizing the loan.
• Loan Offer: Review and accept the loan offer, including the amount, interest rate, and terms.
• Settlement: Finalize the purchase with the lender’s funds and complete the legal and administrative tasks.

“Thinking of investing in property? Here are some key costs to consider beyond the purchase price:

• Lenders Mortgage Insurance (LMI): Required if you borrow over 80% of the property’s value.
•  Stamp Duty: A state tax based on the property’s price, which varies by location.
•  Legal & Conveyancing Fees: Costs for a solicitor or conveyancer to handle the paperwork and transfer of ownership.
•  Inspection Costs: Fees for building and pest inspections to uncover any issues before you buy.
•  Ongoing Costs: Property management, insurance, maintenance, and council rates. Be sure to budget for these, as they affect your rental income and returns.
•  Settlement Costs: Administrative fees for registering the property and completing the transfer.

Here are the key tax implications you should be aware of:

• Rental Income: Income from renting out your property must be declared and is taxed at your marginal rate—make sure to factor this into your financial planning.
•  Capital Gains Tax (CGT): Any profit from selling your property is subject to CGT. Hold the property for over 12 months, and you might be eligible for a 50% discount on the capital gain.
•  Deductible Expenses: Reduce your taxable income by claiming deductions on things like mortgage interest, property management fees, repairs, council rates, and insurance.
•  Capital Works Deduction: Claim deductions for the cost of construction or renovations, including improvements that extend the property’s life. You can claim up to 2.5% per year for up to 40 years.
•  Negative Gearing: If your costs exceed rental income, you can claim the loss against other income, potentially lowering your overall tax bill.

“Ready to make an offer on an investment property? Here’s a step-by-step guide to help you through the process:

• Research the Market: Study market trends, recent sales, and current conditions. Use online tools or consult real estate agents to understand the property’s value.
• Determine Your Offer Price: Set a competitive offer based on your research. It can help to consult a property valuation expert or real estate agent for advice.
• Prepare Your Offer: Draft a formal, written offer that includes your proposed price, deposit amount, and any conditions (like subject to inspections or finance approval).
• Submit & Negotiate: Present your offer to the seller. Be ready to negotiate on price and terms as counter-offers are common.
• Sign the Contract: Once accepted, carefully review the contract with a solicitor or conveyancer. The contract will outline terms and the settlement date, and you’ll pay the deposit at this point.
• Final Steps: Conduct any necessary property inspections (building, pest, etc.), secure your financing, and finalize the loan before settlement.