Your accountant or financial advisor has no doubt told you to purchase your investment property without putting in any cash at all, and even have the cost of legal and other expenses associated with a purchase included in the loan. The theory is that by borrowing to the maximum amount, you also maximize the tax benefits.

Did you know that your deposit can come from savings, or it may be borrowed against equity in an existing property?

You can also finance your furniture as well if you want to rent the property fully furnished. We have a specialist lender who can provide you with a lease package to lease the furniture and fittings over 36 or 48 months with a low residual of one dollar?

'Interest Only' or 'Principal And Interest'?

Have you talked to your accountant about whether to take a loan where you pay interest only, or a loan where you reduce principal as well as pay interest?

Accountants usually advise property investors to take an interest only loan, the theory being that principal reductions on an investment loan are not tax deductible. We will discuss your options.

Fixed Or Variable Rates?

There is a decision to be made between fixed or variable interest rates and the choice will be based on whether you are comfortable with your loan repayments fluctuating with any interest rate movements.

Investors are quite often advised to select a fixed rate as this ensures a consistent monthly repayment amount and allows easier budgeting. Fixed rates loans are becoming less restrictive and we can guide you as to what the different lenders have on offer. It used to be unheard of to be able to make additional payments but now some lenders will allow some extra principal payments.

Types Of Loans

Each Lender has a specific name for its product and each product operates a little differently from its competitors, but loans for the purchase of an investment property fall into one to four basic types:

• Standard Amortising 25-30 Year Loan: This is the standard loan product which with slight variations has been around for years. You select the term and decide whether you would like a fixed or variable rate.
• Line of Credit Loan: Generally line of credit loans are interest-only and have no term attached which suits a property investor as such an investor is most likely to have been advised to get an interest only loan. These loans have a high level of flexibility in that you can park money in your loan and draw it when you wish without having to notify your lender.
• Multi Account Loan: This loan has a bit of everything and provides the most flexibility of all loans The loan is set up with sub accounts so you can separate your different lending requirements and each account can be tailored with the features you need.
• Offset Account Loan: An offset account loan is generally not a loan that we would suggest an investor should use to finance an investment property, as it is more suited to financing a family home loan in conjunction with an investment. It is a loan which has a savings account linked to it and is more suited to a home loan.

Please refer to our Home Loans section for a more detailed explanation of the various types of loan products that are available.

Loan Structure

We also structure multiple loans to suit your investment strategy. For example:

• Loan Account One: Your home loan and you might like to have it as a principal and interest loan over 20 years with a three years fixed rate.
• Loan Account Two: A $35,000 interest only line of credit on a variable rate which you use for share trading.
• Loan Account Three: Also an interest only line of credit, but with a five year fixed rate for purchasing an investment property.

The Line of Credit loan and the Multi Account loan usually have a higher rate of interest (this is the cost for added flexibility), but once you are set up with the structure which best suits your individual needs, you'll easily be able to purchase a second investment property when the time comes.

Loan structures are the key, and this is where our expertise will not only help and guide you, but also save you angst, time and money!

Investment Loan Checklist

When sourcing finance for your investment property we will:

• Ensure that you set up an advantageous and flexible loan structure.
• Get a competitive interest rate for you - lower rates mean lower payments.
• Investigate the ongoing fees as these can add up considerably over the life of the loan.
• Discuss with you whether the interest only option suits your needs.
• Ensure that your investment loan is structured with enough flexibility to ensure future purchases can be made easily.

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By getting it right in the beginning you can avoid serious headaches down the track and smoothly travel the path of successful property investing.

Please contact us for help with any of these products and determining which is the best alternative for your particular circumstances. Our Home Loans section contains more information for those wishing to purchase a residential property.