An investment home loan is a type of mortgage specifically designed for purchasing a property that you intend to rent out or use for investment purposes, rather than for personal use. These loans are used by individuals or businesses to acquire residential or commercial properties that will generate rental income or potentially appreciate in value over time.
Key Features of an Investment Home Loan:
Loan Purpose:
The primary purpose is for property investment, where the borrower rents out the property to generate income, or plans to sell it at a higher value in the future. here.Interest rates
Investment home loans typically have higher interest rates compared to owner-occupied home loans, as they are considered higher risk by lenders. However, the interest on the loan is tax-deductible if the property is rented out and the loan is used for investment purposes..loan repayments options
Similar to standard home loans, investment loans offer various repayment options, including interest-only or principal and interest repayments. Many investors choose the interest-only option to reduce monthly repayments in the short term, with the idea of increasing repayments or selling the property later on.Loan-to-Value Ratio (LVR)
Lenders generally allow a lower Loan-to-Value Ratio (LVR) for investment loans compared to loans for owner-occupied properties. The typical LVR for an investment property loan is 80%, though it can sometimes go higher with mortgage insurance..Tax Benefits
Investment property owners may be eligible for various tax benefits, such as deducting interest on the loan, property management fees, maintenance costs, and depreciation of the property.Loan Terms
Investment home loans typically have similar terms to regular home loans, such as 25 to 30 years, though the terms and conditions can vary based on the lender and the borrower's financial situation.Security for the Loan
Like other home loans, the property purchased with an investment loan serves as collateral for the loan. If the borrower fails to make repayments, the lender can seize the property.
Why an accountant is essential when purchasing an investment property?
An accountant can assist you with buying and structuring your investment property loan, but their true value becomes evident at tax time. They can help you maximize the tax benefits of owning an investment property and provide guidance whether you're buying a new or established property. We believe having a skilled accountant on your team is vital throughout the entire process.