Investing in property is one of the more popular choices of Australians and other investors from all over the world. However, in order to gain the most out of the investment, it is critical to match it with a mortgage solution. According to David Docking, Managing partner at David & Partners, the best solution would be to ensure a competitive rate on the loan with loan features that are suitable to a particular situation. It is important to explore all lending policies and procedures to be updated by any last minutes changes made by banks.
David will be at Dempsey Brasserie for a tea time talk on Wednesday, 18th March, 3pm to share his insights.
Standard variable rate – offers a competitive rate including flexible features applicable to your changing needs. An obligation-free conditional pre-approval can be provided so that you can start looking at properties. This option is what you will likely go for after completing an introductory fixed, tracker or discounted deal because your mortgage payments can go up or down according to the movements of interest rates. The rate you will pay for the SVR mortgage will be determined by the mortgage lender so that if the interest rate increases by 1%, the lender can choose not to increase the SVR or they could increase the SVR by an amount less than 1%, exactly 1% or more than 1%.
Fixed rate mortgage – it can be hard to predict whether interest rates will go or down in the future but fixed mortgage rates provide you the peace of mind against such uncertainty. However, before making the decision on fixed mortgage rates, it makes sense to listen to opinions whether pro or con because their reasons are often justifiable and based on statistics and economic trends. You certainly do not want to end up paying more for a property if the interest rates should suddenly fall down.
Combination loans or part fixed and variable – means gaining the advantages of both worlds. It sounds too good to be true but this type of mortgage is aimed to provide borrowers with security during an unpredictable climate. If the borrower obtains a loan on a variable rate, once it increases, it can be switched to a fixed rate and back to the variable rate if interest rates drop. While this option provides a measure of security for the borrower, it is not suitable for all borrowers.
Interest only mortgage – the payment that the borrower is required to pay consists only of the interest for a specified period of 5 or 10 years. The borrower has the option to pay more for the interest but the principal remains unchanged. This option is ideal for borrowers with fluctuating incomes so that they make substantial payments to the principal when they have the money.
David & Partners can help you compare different loans and interest rates to help you work out the best arrangements. There is always a change that there is a superior option available that can significantly provide you savings and tax benefits in your Australian property investment. There are many options for property investors in Australia and the best fit will depend upon a particular strategy and investment situation.