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Home loan features essential for buying an investment property

Home loans for investors or ordinary home buyers are, in essence, the same. However there are a few features that will be of greater interest and value to investors. Listed below are just a few of those features.

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Ability to set the repayments timing and frequency

This flexibility can be extremely useful, as you can time out when you have to make your loan repayments to coincide with when your tenants pay their rent. This will help you immensely with juggling your finances.

Looking for more information on how to manage your finances? Have a look at our hacks to keep your financial planning on track.

Option of making interest-only repayments

girl-looking-out-window Two in three property investors make interest-only repayments. With interest-only repayments, you spend a certain amount of time (usually 5-10 years) only paying back the interest on your home loan, rather than both the principal and the interest. This saves you money in the short-term.

In the time you spend making interest-only repayments, you can use the money you’ve saved on both tax and the loan repayments to pay back any other debt you may have. Initially, making lower repayments can also make it easier for you to manage your investment property.

However, once the interest-only term is over, you will then have to pay both the principal and the interest, and you’ll have less time to make all of your repayments. You won’t have really made any headway in regards to paying back your loan during the interest-only period, and in the end the total amount you pay back will be greater than if you had just paid back the principal and interest from the outset.

With any luck though, by the time it comes for you to pay off both the principal and the interest, the value of your property will have gone up and you can therefore start charging your tenants more for rent. The rent increase will help you to make the higher repayments.

Investors with particularly strong financial management skills can also choose to make extra repayments on the loan, while still making interest-only repayments. This means they will still save money in the short term, but will also have less to pay back when the interest-only period expires.

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Option of an offset account or redraw facilities

Any interest earned on money accrued in an offset account (a separate transaction account linked to your home loan) is deposited into your home loan account. This reduces the amount of interest you’ll have to pay on your loan later. You’ll also be able to access these funds at any time, should you have sudden need for them, this account will help you get further ahead of your loan repayments.

For example, redrawing facilities allows you to deposit any extra income into your home loan account, which enables you to make progress on repaying your loan. You can also withdraw funds that exceed your regular repayment amount, and this money can be used to make repairs on your investment property.

Having the option to make extra repayments is important, particularly if you’re making interest-only repayments.

A Line of Credit

If you already own your own property, having a line of credit loan will allow you to access the equity in that property at any time to use it as a deposit on your next investment property, or to pay for any maintenance and renovations, or other such expenses.

In essence, it’s like having a credit card, where you are able to withdraw a certain amount and spend it on whatever you choose, but you’ll pay interest on what you owe afterwards.

You'll have to meet certain criteria before anyone will lend to you. Lendi has a list of a few things lenders look for in hopeful investors.

Tags: investing, home loan, investment property

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Important legal stuff

Lendi is the trading name of Lendi Pty Ltd (ACN 611 161 856), a related body corporate of Auscred Services Pty Ltd (ACN 164 638 171, Australian Credit Licence 442372). We will never sell your email address to any third party or send you nasty spam, promise.
# Quoted rate applies only to PAYG loans with LVR of 80% or less with security in non-remote areas. All applications are subject to assessment and lender approval.
Lendi is a privately owned and operated Australian business. Our mission is to change the way Australians get home loans by providing a faster, smarter and more secure home loan experience designed around the customer’s convenience and needs. Although Lendi compares over 1600 products (2,500+ products including feature and pricing variations) from more than 35 lenders, we don't cover the whole market or compare all features and there may be other features or options available to you. While Lendi is 35% owned by founders and employees, we have also been supported by some great minority shareholders including Bailador, Macquarie Bank Ltd and a number of Australian sophisticated investors. Lendi's board is majority independent and non-executive.
WARNING: This comparison rate is true only for the example given and may not include all fees and charges. Different terms, fees or other loan amounts might result in a different comparison rate. The comparison rates are based on a loan amount of $150,000 over a loan term of 25 years. Fees and charges apply. All applications are subject to assessment and lender approval. Quoted rate applies only to PAYG loans with LVR of 80% or less with security in non-remote areas. All applications are subject to assessment and lender approval.
IMPORTANT INFORMATION: Loan terms of between 1 Year and 40 Years are available subject to lender and credit criteria. Maximum comparison rate will not exceed 14.99% (see comparison rate warning above). Any calculations or estimated savings do not constitute an offer of credit or a credit quote and are only an estimate of what you may be able to achieve based on the accuracy of the information provided. It doesn't take into account any product features or any applicable fees. Our lending criteria and the basis upon which we assess what you can afford may change at any time without notice. Savings shown are based on user inputted data and a loan term of 30 years. All applications for credit are subject to lender credit approval criteria.
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