Thinking about buying an investment property? As a Tasmanian Government employee, you're in a unique position when it comes to accessing investment loan options from banks and lenders across Australia. Your steady employment and reliable income can work in your favour, but knowing how to compare investment loans properly will make all the difference to your property investment strategy.
Understanding Investment Loan Basics
When you're applying for an investment loan, lenders view you differently than a home buyer. They're assessing your ability to service the loan based on rental income plus your regular salary. The loan to value ratio (LVR) requirements are typically stricter for investment properties, often requiring a larger deposit to avoid lenders mortgage insurance (LMI).
Most investment property loans require at least a 20% deposit, though some lenders may accept lower deposits with LMI. This insurance protects the lender if you default on payments, but adds to your overall borrowing costs.
Key Features to Compare
When comparing investment loan options, focus on these essential elements:
• Investment Loan Interest Rate: Variable interest rates tend to be higher for investment properties compared to owner-occupied homes. Fixed interest rates offer certainty but may limit your flexibility
• Interest rate discounts: Your status as a government employee might qualify you for preferential rates with certain lenders
• Loan amount and borrowing capacity: This depends on your income, existing debts, and the rental yield of your chosen property
• Property investment loan features: Look for offset accounts, redraw facilities, and the ability to capitalise interest
Ready to get started?
Book a chat with a Finance and Mortgage Brokers at Public Home Loans today.
Calculating Your Investment Loan Repayments
Calculating investment loan repayments involves more than just the principal and interest. You'll need to factor in:
- The loan amount after your deposit
- The interest rate (variable or fixed)
- The loan term (typically 25-30 years)
- Any fees and charges
Many investors use interest-only repayments initially to maximise cash flow and negative gearing benefits. This strategy can help with tax deductions, as interest payments on investment properties are generally tax-deductible.
Property Types and Location Considerations
When you research property options, consider how different property types affect your loan:
• Apartments: Often have lower entry costs but may face more lending restrictions
• Town houses: Typically offer better capital growth potential than apartments
• Stand alone dwellings: Usually attract the most favourable lending terms
Location matters too. Properties in established areas with good rental demand typically receive more favourable loan terms than those in developing or remote areas.
The Application Process
The investment loan application process requires thorough documentation. You'll typically need:
• Recent pay slips and employment confirmation
• Bank statements from the last three to six months
• Tax returns and assessment notices
• Details of existing assets and liabilities
• Information about the property you're purchasing
As a government employee, your employment stability often works in your favour during assessment. Many lenders view public service positions as secure employment, which can help with loan approval.
Building Your Investment Property Portfolio
If this is your first investment property, focus on establishing a solid foundation. Once you've successfully managed one rental property loan and built equity, you can consider expanding your investment property portfolio. Each subsequent purchase becomes part of your overall property investment strategy.
Additional Costs to Consider
Don't forget about stamp duty, which varies by state and can significantly impact your initial investment. In Tasmania, stamp duty rates differ for investment properties compared to owner-occupied homes. Factor these costs into your overall investment calculations alongside your loan repayments.
Working with Specialists
Given the complexity of investment lending and the various loan products available, working with a mortgage broker who understands both investment property finance and the specific benefits available to government employees can save you time and potentially money. They can help you access a streamlined application process and identify lenders offering the most suitable terms for your situation.
Whether you're buying a rental property as your first investment or expanding an existing portfolio, taking time to properly compare your options will pay dividends in the long run. Your investment in real estate should align with your financial goals and risk tolerance.
Ready to explore your investment loan options? Call one of our team or book an appointment at a time that works for you.
