When you're serving or have served in the Australian Defence Force, building wealth through property investment can be a smart financial move. However, choosing the right investment loan requires careful comparison of your options. Let's explore how to evaluate investment loan options from banks and lenders across Australia.
Understanding Investment Loan Basics
Buying an investment property differs significantly from purchasing your family home. Investment property loans typically come with:
• Higher interest rates compared to owner-occupier loans
• Different loan to value ratio (LVR) requirements
• Specific lending criteria for rental properties
• Various loan features designed for property investors
Whether you're considering a town house, apartment, or stand alone dwelling, understanding these fundamentals helps you make informed decisions about your first investment property or expanding your investment property portfolio.
Key Factors in Investment Loan Comparison
Interest Rate Options
When comparing investment loan interest rates, you'll encounter both variable interest rate and fixed interest rate options. Variable rates fluctuate with market conditions, while fixed rates provide certainty for your loan repayments during the fixed period. Many lenders offer interest rate discounts for defence personnel, so enquire about any special rates available.
Loan Amount and LVR
The loan amount you can borrow depends on several factors including your borrowing capacity, the property value, and the lender's maximum LVR. Most lenders require a minimum 20% deposit for investment properties to avoid lenders mortgage insurance (LMI), though some may accept lower deposits with LMI.
Loan Features
Consider which property investment loan features matter most to your investment strategy:
• Offset accounts to reduce interest charges
• Redraw facilities for accessing extra repayments
• Interest-only repayment options
• Portability for future property purchases
Ready to get started?
Book a chat with a Finance & Mortgage Brokers at Defence Loans today.
Preparing Your Investment Loan Application
A smooth application process starts with proper preparation. Lenders typically require:
• Recent bank statements (usually three months)
• Proof of income and employment
• Details of existing debts and commitments
• Information about the property you're purchasing
Having these documents ready can help create a streamlined application process.
Research Property and Market Considerations
Before applying for an investment loan, thorough research of the property market and potential rental yield is crucial. Consider:
• Location and growth potential
• Rental demand in the area
• Ongoing property expenses beyond loan repayments
• Stamp duty costs in your state
Calculating investment loan repayments against expected rental income helps determine if the property suits your investment goals.
Tax Considerations for Defence Investors
Property investment offers several tax benefits, particularly negative gearing opportunities when your rental income is less than your property expenses. This can reduce your overall tax liability, which is particularly valuable given defence personnel's regular income.
Remember to factor in:
• Depreciation claims on the property and fixtures
• Deductible expenses like property management fees
• Capital gains tax implications when selling
Making Your Investment Loan Decision
When buying a rental property, don't just focus on the interest rate. Consider the total cost of the loan, including fees, and how the lender's criteria align with your investment property strategy.
Some lenders specialise in defence lending and understand the unique aspects of military careers, including deployments and postings. These lenders may offer more flexibility in their assessment process.
Whether you're investing in real estate for the first time or expanding your portfolio, comparing multiple investment loan options ensures you secure appropriate finance for your property investment goals.
Choosing the right investment loan is a significant decision that can impact your financial future. Defence Loans understands the unique circumstances of current and former ADF members and can help you access investment loan options from multiple lenders. Call one of our team or book an appointment at a time that works for you.
