Investment Property Loans

The deposit required to purchase an investment property typically ranges between 10% and 20% of the property’s purchase price (plus costs such as stamp duty, transfer fees, legals etc). However, the exact amount depends on factors such as your lender's requirements, the property value, and your financial situation.

1. Standard deposit (20%):
   Most lenders require a 20% deposit to avoid paying Lender’s Mortgage Insurance (LMI). For example, if you’re purchasing a $500,000 property, a 20% deposit would be $100,000. A larger deposit can also result in better loan terms, including lower interest rates.

2. Lower deposit (10%):
   Some lenders may accept a deposit as low as 10%. For a $500,000 property, this would be $50,000. However, if your deposit is less than 20%, you will generally need to pay LMI, which protects the lender in case you default on the loan.

3. Using equity:
   If you already own a property, you may be able to use the equity in that property as a deposit for your investment property. This could eliminate the need to save a large cash deposit and allow you to leverage your existing assets for investment.

Additional costs to consider:
In addition to the deposit, there are other upfront costs such as stamp duty, legal fees, conveyancing, and pre-purchase inspections. It’s important to budget for these to avoid any surprises.

At Rosh Partners, we can help you understand your deposit options and guide you through structuring your investment loan to suit your financial goals.

The maximum available interest only loan term is 15 years; this has recently come to market (Dec 2024). The majority of lenders offer between 5 years and 10 years.

Generally speaking, if you a have a home loan (which is non tax-deductible), then your 100% Offset account should remain linked to your home loan and not your investment loan. This is because your investment loan interest is tax-deductible while your home loan interest is not.

If you have already equalised your home loan offset account (have saved the same amount in the offset as what your loan balance is; great problem to have), then setting up a linked 100% offset account to your investment loan can be a good idea, as it’s better to save some interest than none at all.

Choosing between Interest Only (IO) and Principal & Interest (P&I) repayments for your investment loan depends on your financial goals and cash flow needs.

• Interest Only (IO): With an IO loan, you only pay the interest for a set period (usually up to max 10 years), resulting in lower monthly repayments. This can free up cash flow for other investments or expenses. However, you won't be reducing the loan balance during the IO period, and when it ends, your repayments will increase as you start paying both principal and interest. Additionally, IO loans can come with slightly higher interest rates, and less equity will be built up over time.

• Principal & Interest (P&I): With a P&I loan, you make repayments that cover both the interest and part of the loan's principal. This means you'll gradually reduce the loan balance, building equity in the property. Although the monthly repayments are higher than IO, P&I loans typically have lower interest rates, and you're paying down your debt from day one.

Key considerations:

• Cash flow: If you want to maximize cash flow for other investments, IO might be more suitable.

• Interest Only Investment Loans: Interest rates on IO home loans are traditionally slightly more expensive than P&I investment home loans.

• Long-term strategy: If your goal is to reduce debt and build equity in the property, P&I repayments could be a better fit.

• Tax implications: IO loans might provide tax benefits, as the interest expense could be deductible on investment properties. Always consult a tax professional for advice specific to your situation.

At Rosh Partners, we can help you evaluate which option aligns best with your financial strategy.

Engaging solicitors, conveyancers, and pre-purchase inspection services early in the property buying process can help ensure a smooth transaction and protect you from potential pitfalls.

1. Solicitors or Conveyancers:
   You should engage a solicitor or conveyancer as soon as you begin seriously considering purchasing a property. They will assist with reviewing the contract of sale, conducting title searches, and handling the legal aspects of the transaction. Having them involved early allows them to flag any issues with the contract or property that could impact your decision or negotiation.

2. Pre-Purchase Inspections (Building and Pest):
   It’s a good idea to arrange pre-purchase inspections before signing the contract or during the cooling-off period (if applicable). A building and pest inspection will help you identify any structural issues, potential damage, or pest infestations. This information is crucial as it can affect the property's value or even your decision to proceed with the purchase. If any major issues are found, you may be able to negotiate repairs or a lower price with the seller.

Why timing is important:

• Avoid surprises: Early engagement of these professionals can help you avoid costly surprises down the track.

• Protect your interests: Solicitors and conveyancers ensure that your legal rights are protected, while inspections give you a clear understanding of the property's condition.

• Smooth the process: Having these services lined up early means fewer delays and a more straightforward path to settlement.

At Rosh Partners, we can connect you with trusted solicitors, conveyancers, and inspectors to ensure you have the right support throughout your property journey.