Pink Finance

Investing in property, residential or commercial, has many potential financial benefits. These include wealth creation through capital gains and tax relief through gearing, leading to an improved lifestyle, more peace of mind and security in retirement.

Making sure you have the correct structure for your investment portfolio is crucial. Regardless if you are a new or experienced property investor, it is imperative to get advice from your accountant or your financial adviser.

Pink Finance will consider your short and long term plans to ensure your loan is structured correctly from the outset, allowing your investment strategy to be implemented straight away.

 

How do I get started?
Negative Gearing and Positive Gearing
Which Investment loan is best for me?
Principal and Interest vs Interest Only Repayments

 

How do I get started?

If you are already own property, you may not need a deposit. If you have made extra repayments on your mortgage or the value of your property has increased, you may have suitable equity in your property.

This equity may enable you to borrow against your existing property to fund a deposit for a new purchase, without using your own cash. Pink Finance will be able to let you know if you have enough equity to do this.

If you are not a property owner or if you do not have enough equity, don’t despair! You can use your savings as a deposit for your investment property. Pink Finance will check your situation to make sure you have enough of a deposit to cover all costs involved with your investment property.

 

Negative Gearing and Positive Gearing

One of the attractions of investing in property is the potential negative gearing benefits. In simple terms, this is where the costs (such as loan interest and fees) associated with having an investment property are greater than the rental income. The difference may be offset against your income tax. Positive gearing indicates that your income is greater than your loan costs, however there may still be some tax benefits. Always seek advice from your accountant or financial adviser prior to purchasing an investment property.

 

Which Investment Loan is the best one for me?

As there is no perfect investment strategy that would suit everyone, there is no “best” investment loan – as we would all have this one! There are many different loans designed to cater for different needs –Pink Finance will help you choose.

• Basic home loan – as the name suggests, a simple variable loan with minimal extra features which can be principle and interest or interest only . Most provide the option of making extra repayments and accessing them through redraw, typically with low or no ongoing fees.
• Fixed Rate loan – a facility which is fixed in for a specified period – typically 1-5 years. This provides you with the security that your repayments will be stable for that given time; also good for those on a budget and good for calculating interest costs for your accountant. This type of loan may limit you to make extra repayments. Be aware that if you break your fixed contract, you may be up for a break cost fee. You can also lock the fixed rate by paying a rate lock fee.
• Standard Variable Rate – A flexible loan which will vary according to the Reserve Bank. They allow for many different features and benefits such as offset accounts, repayment holidays, and construction facilities. The standard variable rate is often used in conjunction with a discounted package to get you a more competitive interest rate
• Discounted Variable Rate – With some lender packages, variable interest rate discounts can be applied depending on what you borrow. This may incur an annual or monthly fee but the package offers additional benefits on other financial products such as credit cards, transaction accounts and insurance. Each lender provides different packages, products and discounts and Pink Finance will discuss which ones will most benefit you.
• Line of Credit or Equity Loan – An ongoing interest only facility which has a maximum aproved limit. With your line of credit you can draw down the funds for any purpose you require and you will only pay interest on the balance you have used.
• Split Facility – This offers the flexibility of having more than one loan type under the same facility. Typically part fixed and part variable, this product can offer peace of mind with some of your repayments remaining stable whilst you can make unlimited extra repayments on your variable loan portion. A split loan may be most economical when linked with a package.

 

Principal Only vs Interest only home loan repayments

There are two types of repayment methods that you can set up for your loan: Principal and Interest and Interest Only repayments. Principal and Interest repayments are when the bank has calculated the amount you borrow together with the interest over the total period of your loan term (normally 30 years) to pay that loan off in full by the end of the agreed term.

Interest Only indicates that the repayments you are required to make are based on the balance of your loan. Because you are only paying the interest, the repayments are usually lower. This may help with budgeting and cash flow but unless you make additional repayments, the loan balance will not reduce.