How to Use Fixed Rate Terms for Your Investment Loan

When you're considering buying an investment property, one of the most important decisions you'll face is choosing between a variable interest rate and a fixed interest rate for your investment loan. For current and former Australian Defence Force members, understanding fixed rate loan terms can provide stability and predictability in your property investment strategy.

What Are Fixed Rate Investment Loans?

A fixed interest rate means your Investment Loan Interest Rate remains unchanged for a specific period, typically ranging from one to five years. During this time, your loan repayments stay the same regardless of what happens in the broader property market or with the Reserve Bank's cash rate decisions.

This stability can be particularly valuable when you're calculating investment loan repayments and planning your investment property portfolio. You'll know exactly what your mortgage payments will be, making it easier to budget for other expenses like stamp duty, maintenance costs, and potential vacancy periods.

Benefits of Fixed Rate Terms for Defence Members

Defence personnel often face unique circumstances that make fixed rate investment loans attractive:

• Deployment predictability: When you're deployed or posted, knowing your exact repayment amounts helps with financial planning
• Rental yield calculations: Fixed rates make it easier to calculate your expected returns from buying a rental property
• Protection from rate rises: If interest rates increase during your fixed period, your repayments won't change
• Budgeting certainty: Particularly useful when managing negative gearing benefits and tax planning

Considerations When Choosing Fixed Rate Terms

While fixed rates offer stability, there are several factors to consider when applying for an investment loan:

Loan Amount and LVR Impact: The loan to value ratio (LVR) can affect your access to investment loan options from banks and lenders across Australia. Higher LVRs may require lenders mortgage insurance (LMI), which adds to your upfront costs.

Property Type Matters: Whether you're purchasing a town house, apartment, or stand alone dwelling can influence the fixed rates available to you. Some lenders offer different rates based on property types and locations.

Interest Rate Discounts: Your borrowing capacity and relationship with lenders may qualify you for interest rate discounts, even on fixed rate products.

The Application Process for Fixed Rate Investment Loans

The investment loan application process involves several key steps:

1. Research property options and determine your investment goals
2. Gather documentation including bank statements, pay slips, and tax returns
3. Complete the application process with your chosen lender
4. Property valuation and final loan approval
5. Settlement and commencement of your rental property loan

Many lenders now offer a streamlined application process for Defence members, recognising the stable employment and income that military service provides.

Making Your Decision

When deciding on fixed rate terms for your investment loan, consider:

• Current market conditions and rate predictions
• Your personal risk tolerance
• Whether this is your first investment property or an addition to an existing portfolio
• Your long-term property investment strategy
• The specific investment loan options available through Defence-focused lenders

Remember that you don't have to fix your entire loan amount. Some borrowers choose to fix a portion while keeping part on a variable rate, giving them both stability and flexibility.

Fixed rate investment loans can provide the certainty that Defence members need when invest in real estate. By understanding your options and working with experienced mortgage brokers who understand the unique needs of current and former ADF members, you can make informed decisions about your property investment journey.

Call one of our team or book an appointment at a time that works for you to discuss your fixed rate investment loan options.