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. Some lenders charge a higher interest rate for investment properties because their risk may be higher, but this may not necessarily be the case.
If you’re unsure how an investment loan would potentially impact your financial circumstances please talk to our team of professionals. We can guide you through the tax implications of interest only, principal & interest loans, offset accounts etc.
When you buy a property, costs such as establishment fees, solicitor fees and stamp duty add up to several thousand dollars. Instead of trying to find cash to pay these fees, take them into account in your borrowings. That means you don't need thousands upon thousands of dollars in savings to get started. Find out more on how to minimise your cash outlay.
A property is negatively geared when the costs of owning it – interest on the loan, bank charges, maintenance, repairs and capital depreciation – exceeds the income it produces. Simply put, your investment must make a loss before you can claim a tax benefit.
Aside from negative gearing, there are a host of other things to consider for successful property investments.
You can also positively gear a property. This occurs when the investment income exceeds your interest expense (and other possible deductions). Note that you may be subject to additional tax on any income derived from a positively geared investment.
You should also consider any other costs involved when deciding on your investment property strategy.