The biggest difference in a property investment loan is that the interest paid on the loan is most usually tax deductible. If, for example, you are paying $20,000 annually on interest on your home loan, then for you to pay that $20,000, it would be taking maybe as much as $35,000 or more of your current gross salary! As interest is tax deductible on an investment loan, then if you paid $20,000 interest on your investment loan it would ‘create’ a tax deduction of around $7800 per year for someone on the middle tax bracket of 37% (over $80,000 gross income per year).
This means you would only need to ‘find’ an additional $20,000- $7800 = $12,200 to pay the interest. This would normally be covered by the rental received from the investment property.
There are few differences between what you need to do to borrow for a property you’ll live in and for one you’ll rent out. The most common difference is that a property investment loan is almost always on interest only while your current home loan is most commonly principle and interest.
Some lenders charge a slightly higher interest rate for investment properties because their risk may be seen as higher but this is not necessarily the case.
Your Lime property investment consultant will explain how an investment loan would potentially impact your financial circumstances. Working with a highly experienced property investment Mortgage Choice broker can help you to explore the implications and perhaps structure your loans in a way that your mortgage may end up being paid off much faster than you ever thought possible.
