Choosing The Right Investment Loan: Some Interesting Facts
While searching for a home loan, the borrowers have to take a number of factors into account. On many occasions, it is witnessed that the borrowers commit a pricey mistake of picking loans that are not flexible enough to finance the buying of their next home.
The right structuring of the loan is essential to make the whole loan procedure simpler. In addition, it also assists in safeguarding your property and enhances the tax efficiency of the loan.
When it comes to selecting a loan, you need to make a well-informed decision on why you want to go for a loan. Do you intend to keep the property for an extensive period or you want to sell it off quickly? Or are you looking for a investment property portfolio which would produce retirement earnings and secure your post retirement life? Now, these are important questions that you should ask yourself. Given below are few points that you as a borrower should take into consideration while looking for the right investment loan:
1) Interest only and principal and interest loans
If you wish to accumulate equity on your property and pay off the entire amount of the loan gradually, then a principal and interest loan is the right choice for you. On the other hand, if you just plan to pay the tax-deductible amount and utilize the additional finance to purchase other properties instead of repaying the outstanding balance, then an interest-only loan may be appropriate for you.
2) Flexibility to purchase and sell the property
The structure of your loan has to be sufficiently pliable so that it enables you to shift promptly and smoothly while you make a decision of purchasing a new investment property or sell off your present home.
3) Tax deductions
If you have a substantial salary and you are taking out a loan which is equal to the total purchase price of the home, then the amount you need to spend for upkeep and ownership of the home might exceed the revenue that you get from it as rent. The variation or discrepancy is termed as a negative gearing and you can claim a tax deduction for it. As a result, you can lower the amount of tax due on other sources of income including your wages.
4) Fee structure which permits including new properties
It is not at all feasible when you need to make payments for establishment costs whenever you include a new property. Therefore, it is essential that you evaluate the entry and exit fines of various credit lines.
5) Redraw and Line of credit
Redraw and line of credit are typical loan features which might be advantageous for your investment loan. However, you need to weigh these options thoroughly and see whether you actually need them. Their cost should also be taken into consideration and you have to ascertain whether you are in a financial stance to accomplish your goals.
Always keep in mind that guesswork will not be of any use to you if you don’t study the ins and outs of an investment loan properly.
Author Bio: Ashley Jones is a content writer who is interested in writing informative and quality articles on investment loans and emergency loans lender.