Changes in the lending market largely because of regulators wanting to limit investment and interest only lending has resulted in significant shifts in the types of loans being offered by lenders, the types of interest rates available and a large variance between which lenders are wanting investors, versus lenders targeting owner occupied lending. Because of these shifts there has been a surge in the number of investors on interest rates far above what current offers in the market are offering. By reviewing your existing loan – you can currently potentially reduce your rates by 0.5-1% – meaning a significant reduction in costs which can help you focus on paying down debt and achieving your investment goals. What can you do to make sure you’re on a competitive interest rate?

Consider whether you need to have interest only (IO) loans.

IO loans used to be a no-brainer but with the interest rate variance (with IO loans now being more expensive than principal and interest loans) has meant that the benefits of interest only have eroded. You can gain substantial interest savings by taking up principal and interest repayments, which in turn will erode the debts over time on your investment properties – leading you to eventual strong cash flows to help with your investment journey. By paying down your properties earlier in your ownership than delaying the inevitable – it allows you to save on interest and grow your equity which can be used for future deposits on more investment properties or simply to help erode your costs, whilst your rental income grows with time.

Don’t show bank loyalty

Whilst many would think that showing loyalty with a brand would lead to greater benefits to you – surprisingly existing customers will generally get higher interest rates than new to bank customers. With banks relying on borrowers to be ‘lazy’ and stay with them – you can save substantial money by having your mortgage broker review what alternative lenders would be willing to offer to take on your business. Second tier lenders and even some of the Big 4 lenders are currently competing heavily compared to the rest of the lending market to secure new investment lending – so now is a good time to review whether your existing lending is structured in your best interests.

Compared fixed rates vs variable rates

Many Australian’s don’t realise that in many cases banks get access to their fixed rate funds from different sources to their variable loans. What this means is that sometimes fixed rates can be significantly lower than variable rates and vice versa, dependent on how much funding is available in each particular funding pool. In recent times there has been significantly cheaper fixed rates available for investors than variable rates – particularly with interest only lending.

Looking for an investment focussed mortgage broker in Adelaide?

Adelaide Broker is your local Adelaide mortgage broker who can help you with your new investment purchase, review your existing home loan or help with construction, development and commercial finance. Have you been dealing with a bank previously? Grow your investment team by working with Adelaide Broker to get a better finance structure.

Review the Adelaide Broker blog for articles about home loans in Adelaide

By | 2018-10-22T14:47:39+00:00 August 22nd, 2018|Uncategorized|