Looking for the right home loan for your property investment? Well, good timing! Westpac recently announced major discounts of up to 105 basis points for property investment loans, as well as reduced fixed rates for first home buyers by 40 basis points for principal and interest payments.

Andy Wright, Head of Portfolio at Westpac expressed how the discounts were meant to help first home buyers and investors at the start of the investment journey, so they can put the savings to good use such as purchases for their new home.

“This offer also extends to ‘rentvestor’ first-home buyers who are looking to purchase their first property to rent out. We’re seeing this trend increase, with many first-home buyers purchasing properties to rent in more affordable areas while choosing to live in close proximity to the city.”

 

So, what does this mean?

These discounts are part of a current trend of the big four banks reducing their interest-only and key fixed rates. They want to encourage more investor lending by relaxing rates and policies, after a tightening by the Australian Prudential Regulation Authority. This is a great thing for investors, especially those looking to get into rentvesting (read our blog about rentvesting and why we recommend it as an investment strategy)!

If you are looking to find the best deal on a home investor loan, the key step we recommend is engaging a good mortgage broker, who can shop your individual scenario to a number of different lenders, to get the best deal for you – i.e., lower rates and lower fees over the long term.

Questions you should be asking your mortgage broker

Loans, interest rates, and all the hoo-hah that surrounds them can be quite confusing, especially if you are a first time buyer or investor. So, here’s a few key questions we recommend asking your mortgage broker to get started:

What is the difference between a principal and interest loan, or interest-only loan?

Most people take out a principal and interest loan, where you make repayments against both the principal (amount borrowed) as well as paying the interest on that amount, and is generally repaid over a longer period of time, usually around 35-30 years

With interest only loans, on the other hand, repayments are only made to cover the interest on the loan, and the principal amount borrowed will not reduce (unless you make extra repayments). Generally, interest-only loans are for a shorter time period, such as 5 years.      

What is better, fixed or split rate home loan?

It really depends on your situation and what your mortgage broker recommends, but as a basic reference for the different types:

    • Variable interest rate: can go up or down, usually in line with a change to the official cash rate (hence why those announcements from the RBA about interest rates are so much!)
    • Fixed interest rate: will remain the same for the fixed period. Usually, this is for the first few years of the loan, after which the loan will revert to a variable interest rate.
    • Split loan: where part of the loan amount is variable, and the other part is fixed

How should I compare loans before making a decision?

There are a number of online tools and references, however in our experience, nothing beats catching up with your mortgage broker face to face to explain your situation and go through your numbers. This way, they can get the best understanding of your situation, to get you the best deal.

 

If you’d like to know more about getting the best deal for your home loan, we would love to hear from you! Email us at info@ippaustralia.com.au, or make a booking for a call or free in-person consultation via our simple booking system.