I am about to take my first investment loan in the next few months and would love some advice.
What kind of loan features do people prefer for investment loans ? Interest only , borrowing 100% of the value of the property , monthly payments ?
is it a good idea to borrow 100% of the loan or not ? in that case mortgage insurance is pretty high but is that tax deductible ?If you have other non-deductible debt, then IO is the way to go. You may not need to pay LMI, even if you borrow 100%, if you have equity. LMI and other borrowing costs are tax deductible – usually claimable over 5 years.
Terryw
Discover Home Loans
North Sydney
[email protected]Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
as your looking at ‘deductible’ debt – many like to maximise this area as opposed to using their own cash – as Terry indicated, you do this by using equity in another property, either by cross securitising them, (please no howls of protest, we’ve done this to death and back) or by accessing the equity in a separate loan.
even if borrowing costs etc are deductible, its still commercial to find a loan with –
low entry costs
low ongoing costs
low exit costs
competitive variable and fixed rates(the last two don’t always come together, which is pretty annoying if you want to fix the loan
later on)cheers
brahms
Purveyor of Fine Finances
aka Mortgage Broker BrisbaneInterest only is the way to go. You can always pay more if you have no non-deductible debt and want to reduce your liability.
I would also look at a loan with free redraw or an offset account. A lot depends on your individual situation how your structure your loan.
Regarding paying monthly, if you are paying interest only, this is probably the most suitable. If you intend paying down the debt quickly, I would look at paying the half the monthly prinicpal and interest payment each fortnight (inflated fortnightly). This has the effect of taking a few years off your loan.
100% is ok if you are looking for deductions and mortgage insurance will only apply if it is secured by only one property.
You need to provide more information to get a clearer response or sit down with a mortgage adviser / broker and discuss your situation in depth.
Robert Bou-Hamdan
Mortgage Adviser
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