HOME LOANS
A home loan is a lending facility, secured by a mortgage taken over a residential property. The main use of a home loan is to purchase residential property, used as the purchaser’s principal place of residence (owner occupied) or as an investment property. Home loans can also be used to purchase vacant land, build a home (construction) or draw against equity to purchase personal assets or investments. The term of a home loan is usually set-up between 5 and 30 years. Most often home loans are set-up over 30 years as this offers flexibility by allowing the borrower to pay the loan off faster or slower depending on available cash flow.
There are also different ways to set-up the repayment schedule, with principal and interest or interest only offered by most lenders. A principal and interest home loan is most often the set-up used for owner-occupier homes, while interest only investment home loans are set-up for investors. An interest only loan setup can assist a client maximise the interest payable on the loan and, therefore, the potential tax benefit.
INVESTMENT HOME LOANS
An investment home loan is a home loan that is set up for the purpose of funding assets that are used to gain a return for the investor. Investment assets that are most commonly purchased using an investment home loan include investment properties, shares in listed companies and managed funds. Investment home loans are generally set-up as interest only loans so that the investor can maximise the loan amount to maximise the interest payable and, therefore, maximise their tax benefits.