An investment loan is

Required when you are purchasing property for investment purposes. If you plan on receiving an income from your property purchase, this is the type of loan for you.

Many things about investment loans are different to how standard home loans work because they have more strict eligibility requirements. Investment Loans often require a lower loan-to-valuation ratio (LVR), meaning investors need to raise a larger deposit before applying for a loan. They also have a slightly higher interest rate on average than a residential home loan.

Expenses that you make for your investment property may be claimed as tax deductions to reduce your taxable rental income while you’re renting it out, and your capital gains tax if you sell the property.

The tax deductions you may be able to claim for an investment property include:

  • Interest on the Investment Loan
  • Home and Contents Insurance and Landlord Insurance
  • Real Estate Agent’s commission
  • Maintenance costs
  • Council rates
  • Decline in value of depreciating assets
  • Construction costs (“capital works”)
  • Travel expenses to the property to do an inspection, maintenance or repairs

(*Please note this is not taxation advise and we recommend you speak with your accountant for advice- don’t have an accountant? We can refer you to one of our trusted partners Contact us now)

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Other considerations to keep in mind

It’s very important not to misrepresent your intentions for a property when applying for a home loan. Because of the differences in rates, it might be tempting to try to obtain an owner-occupier mortgage no matter what, but loan agents are trained to evaluate whether their borrowers are committing occupancy fraud. That’s because the differences in rates come down to the amount of risk that tends to accompany each type of home loan. With investment properties, there tends to be a greater chance of default, and therefore more exposure.

There are better ways to ensure you’re obtaining the best possible rates for your mortgage if you’re purchasing an investment property. Even though Australia’s Banks and Lenders have been tightening up their requirements for Investment Loans, you can take measures to increase your borrowing capacity and apply for the correct type of funding to support your property ambitions. Compare Investment Property Loans today by Contacting Our Expert Mortgage Brokers 

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