Investment property loans

Reduce risk and maximise returns with an investment lending expert to guide you

Invest in property with confidence

Wondering how to invest in property? Diversify your investment strategy? Looking for a trusted broker with proven expertise in investment lending?

My Finance Agent has been providing tailored investment lending guidance since 2014 to both novices and professionals alike. No matter your level of investment experience, we ensure that you are equipped with the right information to make strong investment decisions that set you up for peace of mind and success.

As Australia's award-winning lending experts - and property investors ourselves - we have decades of property investment experience, which uniquely positions us to serve you. Market-leading rates, a large panel of lenders and innovative loan products are just the beginning. We design fully tailored loan solutions based on thorough analysis. As well as crunching the numbers and scenario planning, we take into account your short and long-term financial goals and exit strategies, for example, paying off your primary residence, managing cash flow and using investment property equity for other purposes.

In addition, we provide free property research tools and access to a national network of real estate buyer's agents and other trusted professionals, all of which support you to make strong, profitable investment decisions.

Keep reading to discover...

Everything you need to know about investment property lending:

Why real estate can create a strong foundation for your investment portfolio

How to apply and get approved for an investment property home loan

Answers to common questions about investment property lending

The importance of working with a professional broker to reduce investment risk and maximise returns

Let's go!

What is an investment property loan?

An investment property loan is a loan that allows you to buy a commercial or residential property to lease or on-sell, rather than live in.

For example, you may lease the property to tenants who pay rent in exchange for using the space for residential or business activities. Or you may generate income by renovating and selling the property for a profit.

If you're looking to generate passive income and build wealth through real estate, an investment property loan may contribute towards achieving your goals.

The pros of property investing

Want to make more money or build wealth through investing? Real estate is a common starting point because it presents numerous advantages.

Long-term growth performance

Over the long-term and on average, Australian real estate has historically grown in value. This potential for growth can result in significant wealth accumulation over time.

Income-generating

Real estate investments, particularly rental properties, can generate a steady stream of rental income. Regular and recurring income can provide a reliable source of cash flow.

Hedge against inflation

Property is often considered a hedge against inflation. As the cost of living rises, property values and rental income tend to increase, helping investors maintain their purchasing power.

Leverage

Real estate can be purchased with borrowed money, which allows investors to control a more substantial asset with a relatively smaller upfront investment. Leverage can amplify both returns and potential risks, which is why professional loan guidance is recommended.

Equity

Equity describes the difference between the property's market value and the outstanding balance on any loans or mortgages secured by the property. As equity builds up in an investment property, either by paying down the loan or the property gaining value, the equity can be use to finance other investments or purchases.

Tax benefits

Real estate investments can offer tax advantages, such as deductions for mortgage interest, property taxes, and depreciation. These tax benefits can reduce the overall tax liability for property investors.

A property investment loan, sometimes referred to as a real estate investment loan, can differ from an owner-occupier home loan in a number of ways.

Loan purpose

The purpose of an investment property loan is to generate income from the property, whereas an owner-occupier home loan is intended to finance the borrower's primary residence.

Interest rate

Interest rates for real estate investment loans tend to be slightly higher than those for owner-occupier home loans. Lenders tend to see owner-occupier home loans as lower risk because the borrower lives in the property.

Investment property home loan vs. owner-occupier home loan

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Loan-to-Value Ratio

Loan-to-Value Ratio (LTV Ratio) is a metric used in lending to assess the risk of a loan by comparing the loan amount to the appraised value or purchase price of the asset being financed. It is calculated by dividing the loan amount by the asset value and multiplying the result by 100 to express the result as a percentage. Lenders generally require a larger deposit for investment property loans than owner-occupier. For investment loans, it's common to see LTV ratios capped at 80%. This means that the borrower must provide a minimum 20% deposit or equivalent equity. For primary residence loans, borrowers may be able to secure financing with lower deposits, depending on the loan program, their creditworthiness and other factors.

Tax treatment

In the case of investment property loans, expenses associated with buying, maintaining and improving the property - including loan interest, account keeping fees, rental agent charges, building maintenance, and property taxes - are generally tax deductible. Tax deductions reduce the borrower's income and therefore the amount of tax they need to pay. Property investment borrowers may also be eligible for depreciation deductions. By comparison, expenses associated with owner-occupier home loans are generally not tax deductible.

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Loan terms

The length of investment property loans can vary. The terms are often similar to those of normal home loans, with options for fixed rate or variable rate options, ranging from 15 to 30 years. Owner-occupier home loan terms are typically more standardised.

Repayment structure

Investment property loans usually offer the borrower the option of interest-only repayments. That is where you pay only interest charges and do not reduce the principal. This can lead to lower monthly payments. For owner-occupiers, interest-only repayments are typically limited to a maximum of five years over the entire loan term.

The biggest barrier for many first-time investors is psychological. There's often a fear of financial risk or making a mistake. We help to eliminate your concerns by doing independent analysis and scenario planning, which empowers you to make strong decisions.

CHRISTOPHER JONSON

Director and finance broker

Real estate investment loan process

Allow us to guide you through the process of getting an investment property loan at a market-leading rate.

1. Determine your investment strategy

Before applying for finance, you should have a clear investment strategy in mind. We will help you get clear about your goals and what's possible. We can also introduce you to trusted real estate research experts and strategists.

2. Assess your financial position

We'll help to evaluate your financial situation, including your credit score, income, existing debts and equity position. If you have an existing mortgage, you may be able to use equity in that property to buy another one, without using any cash savings.

3. Create a budget and projections

As part of that process, we will help you determine how much you can afford to invest and what your budget allows, taking into account the deposit, closing costs and ongoing expenses associated with the property. For your peace of mind, we will plan for a range of scenarios, such as interest rate rises and other contingencies.

4. Select a lender and loan product

Using all of the information gathered above, we'll research our panel of lenders and loan products and come up with a list of recommendations. Our recommendations come with analysis, updated projections, and a summary of pros and cons.

5. Loan pre-approval

Before you start looking for an investment property, it's a good idea to apply for loan pre-approval. We'll prepare the loan application paperwork for you. As well as knowing how much you can spend, pre-approval demonstrates that you are a serious buyer to sellers and real estate agents.

6. Find a property

Finding the right property - one that fits your criteria and budget - can be the most time consuming part of the process. To help you find a property faster, we provide free property research tools and can connect you to reputable buyers agents who can help with the heavy lifting of house-hunting.

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7. Formal approval

Found a property? Offer accepted? Great. Now it's time to seek formal approval by submitting updated application details, including information about the property. The lender will review your application and conduct an underwriting process, which includes verifying your financial information and assessing the property's value and condition. If approved, the lender will provide you with a formal loan offer.

8. Review the loan terms and sign

We help you review the terms and conditions of the loan carefully to ensure that everything is in order before you sign the documents.

9. Settlement

Property settlement is a legal process of transferring the ownership of a property from the seller to the buyer. On the date of settlement, your lender will transfer funds to the seller to pay for the loan balance. Your solicitor or conveyancer will transfer any other funds and register the property in your name. We make sure that all parties have everything they need so that settlement goes smoothly. We also have trusted network of legal service providers should you need a recommendation.

10. Follow up and review

Most brokers will consider their job done at settlement. At My Finance Agent, we review your loan at one-month post-settlement to check that your first repayment processed properly and that your loan is operating as it should. At 12 months, and every year as long as your loan is active, we will automatically conduct a loan review to see if we can improve your loan rate or other terms.

My Finance Agent clients know they're always getting the best deal. We automatically review every loan annually, which is not something your bank will do. If we can get you a lower rate, we will. We're always working for you.

BELINDA SLATER

Finance broker

Frequently asked questions about investment loans

Do you need to already own a property to buy investment real estate?

No. Many people buy an investment property before they buy their first home. Property ownership may unlock benefits such as passive income, access to a line of credit at mortgage rates, tax advantages and more.

Do you need a cash deposit to invest in property?

Not necessarily. If you are already a homeowner or mortgage borrower, you may be able to release equity from your existing property to buy an investment property. 'Equity' is the difference between the value of your property and the amount you owe to the lender.

Are mortgage rates higher for investment properties?

Compared with owner–occupier home loans, mortgage interest rates are generally 0.50 to 0.75% higher for investment property loans. This difference, however, may be offset by tax benefits, claimable deductions and interest-only repayment terms.

Can I use projected rental income to help qualify for an investment property loan in Australia?

Yes, you can typically use rental income to help qualify for an investment property loan. When applying for a mortgage to purchase an investment property, lenders often take into account the potential rental income the property is expected to generate. This rental income can help you meet the lender's eligibility criteria and improve your borrowing capacity.

What are the risks associated with investment property loans?

Investment property loans come with various risks that investors should be aware of before proceeding. Some of these include market risk (property value changes), vacancy risk (ability of rental income to meet repayments), liquidity risk (ability to sell the property), interest rate changes, and property management and maintenance costs.

Managing investment risk is one of the reasons using an experienced broker is so important. Our guidance can help you make informed decisions that result in better investment performance, as well as peace of mind.

GREG ROBINSON

Finance broker