Investment Loans

There’s a lot to know about property investments, such as how to choose the best investment loan that meets your needs and goals. A good investment loan can make property investment a much smoother process.

Smiling couple being shown into an open home by an agent

Investment loans vary depending on what you’re looking to achieve, and can be either very simple (like your standard home loan), or something more complex that helps you make effective use of tax, gearing and repayments. You can also make good use of loan features such as redraw, offset and additional repayments to help manage your investment loan.

The range of investment loans and loan features available to suit both new and experienced investors is now quite extraordinary and which investment finance method you choose will depend on a number of factors, including whether or not you are carrying existing personal debt in the form of an owner-occupier mortgage or personal loans and other debt. Generally speaking, it’s better to pay off personal debt first, minimising investment debt as much as possible during this period.


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6 steps to buying an investment property.

Buying an investment property can be an excellent way to create wealth and like any investment, doing the research before you take the plunge will help save you thousands. The key is understanding the risks and benefits of doing this and I will assist you with this.

  • Find out how much you can borrow

    Getting an idea of how much you can borrow is the first step to buying an investment property. It gives you a general idea of your target price range, so you can narrow your property search within your purchase budget.

    Lenders will also consider the potential rental income you will get from the investment property when calculating how much you can borrow.

  • Calculate your loan and purchase costs

    As a general rule, you will need about 20% deposit for an investment property purchase, however if you have existing property, you may be able to use your equity to cover more of the deposit. The criteria for deposits will differ between lenders. In addition to your deposit, you will need to consider the following costs:

    • Risks of using existing properties equity, especially if it’s your own home
    • Loan application fee
    • Valuation fees
    • Statutory government charges
    • Conveyancing and legal fees
    • Lenders Mortgage Insurance (LMI) if you are borrowing more than 80% of the property value.
  • Investigate your investment loan options

    Property investment loans are available to suit just about any investment strategy. The common loan options for property investment include:

    • Line of credit loans may help you invest in property sooner if you already own a property. Line of credit loans tap into the existing equity you have built up in your existing property to use towards a deposit for your investment property.
    • Interest-only loans suit investors who are focused on achieving capital growth in the short to medium term, and often go hand in hand with negative gearing.

    You’ll also need to consider your loan repayment options, some property investors choose to pay interest in advance. Different repayment options will suit different investment strategies.Your mortgage adviser will explain and potential risks of these.

  • Get loan pre-approval

    Your investment loan pre-approval will give you a head start on other buyers by having your loan application pre-approved, as well as ensuring you shop within your budget.

    A formal pre-approval works the same as a formal loan application, except without the security details. With a pre-approval, your lender will assess your income, expenditure, assets and liabilities to determine how much you can borrow, as well as assessing the documentation normally required to get full loan approval.

    Be wary of any pre-approval that has many conditions attached to it. I can help you to apply for a formal pre-approval.

  • Find a suitable property

    Whether you select a residential investment property, commercial investment property, or even a holiday rental investment property there is ample opportunity to invest. Consider the following when choosing your investment property:

    • Location: is the property in a location that will be well-tenanted or is likely to experience property price growth?
    • Demographics: is the property suitable for the type of tenants in the area, e.g. low-maintenance apartments for young professionals?
    • Infrastructure: is there appropriate infrastructure in place, such as transport, shops, cafes and schools?
    • Development: is there any development planned for the area that may improve existing infrastructure, leading to possible improvements in tenancy rates or price growth?
  • Buying your investment property

    Conduct relevant searches including building and pest inspections. If you’re buying your investment property at auction you will need to complete all inspections prior to auction day.

    View the contract of sale to check conditions and inclusions. Again, if you are buying at auction it is important to have your solicitor go through the contract of sale prior to making a bid.

    Make an offer or bid at auction to secure your investment property purchase. Remember, you’ll need to pay a deposit if your offer or bid is accepted so be prepared to cover at least five to ten per cent of the purchase price.

    You should also check that the conditions of sale you expected are included in the contract; you may want to make the sale subject to finance and satisfactory building and pest inspections (these conditions will not apply to a sale by auction).

    Finalise your investment loan approval by contacting me with the details of the property. If you have loan pre-approval, full loan approval may take only a few days. Once your loan has been approved, you will receive a formal Letter of Offer that will need to be signed and returned to your lender as soon as possible.

    Settlement of your loan will then get underway, starting with the receipt of your loan documents. You will need to forward these to your solicitor, who will then liaise with your lender to schedule the settlement date. A settlement timeframe will have been set out in the contract of sale.Your first loan repayment will usually be due one month after settlement.

    Don’t forget to organise relevant insurance, including building and landlord protection. You may also want to organise a property management service, if you have not already done so as part of the purchasing process.