Property Investment Finance
Most lenders offer the same suite of products. There is no doubt that there are differences between the same products offered by different lenders, but choosing the wrong product will probably have a greater financial impact than the wrong lender.
Property investors need to first decide which product is best for them and then decide which lender offers the best deal for the particular product, thereby comparing apples with apples.
Let’s look at the main products offered by lenders and in what circumstances they should be used.
The main types of products that you may consider using are:
- Discount variable
- Basic variable
- Line of credit
- Fixed rate
- Standard Variable
How do I choose the best product for me?
Loan term. Consider how long you’ll hold the property or loan. If you’re only going to hold the property for a few years, then consider using a discount variable loan. If you plan to hold the property for the long term then choose the loan with the lowest ongoing overall cost.
Capital growth. Break (or early repayment) fees can be an ugly side effect of good capital growth. Consider the example where you expect your investment property’s value to increase significantly in the short term. You plan to take advantage of this increased value by increasing the loan in three years time (and using this increase for future investing). However, if the loan has break fees that exist for five years, then you may be up for more fees. Ask about break (or early repayment) fees before entering into the loan.
Overall flexibility. Most investors buy and hold property for the long term. However, an investor’s needs, views, plans, goals, etc. Can change over time. Make sure that you maintain your flexibility. Choose a product that will allow you to change the loan without any significant costs.