Promoted by Loans.com.au
Low interest rates won't be around forever, so if you're currently unhappy with your rate, it might be worth refinancing and getting a better deal. This is exactly what many Australians are doing now based on recent figures.
According to the latest data from the Australian Bureau of Statistics (ABS), $ 16.05 billion in home loans were refinanced from bank to bank in October 2021 – one of the highest levels ever recorded by ABS.
However, refinancing an investment home loan is a little different than refinancing an owner-occupied loan. Here are five things you should know before making a better deal.
1. The cost of refinancing
Even though refinancing at a better rate may save you money down the road, it will cost you quite a bit of money initially. There are several costs that can be related to refinancing, such as application fees, discharge fees, settlement fees, mortgage registration fees, exit fees, etc.
That said, investor loan interest rates are usually a bit higher than homeowner loan rates, so refinancing at a lower rate will usually pay off in the long run. You might even be able to recover most or all of these costs after a few months of repayment, or during the first few years.
2. Tax deductions
One of the perks of being a real estate investor is the number of tax deductions you can get. If you are refinancing an investment loan, did you know that you might qualify for a tax deduction for borrowing costs and exit costs? In some cases this may apply, which is why it is recommended that you consult your tax advisor first.
3. Your Loan to Value Ratio (LVR)
When you refinance, the higher your loan-to-value ratio (LVR), the lower your equity and the greater the risk you represent to the lender. If you have a high LVR, the lender may charge you a higher interest rate to offset this risk. Investment loans usually have more stringent LVR requirements, and many lenders won't even allow you to refinance unless your LVR is at least 75% or less.
4. Credit Rating
Your credit rating plays an important role in determining the interest rate you will pay on your loan – the higher your credit rating, the less risky you are in the eyes of the lender. For investors, having a good credit rating is especially important as there are tighter credit restrictions on investment loans.
Refinancing is a demand for credit, which will appear on your credit report and may influence your credit score. If you refinance too often, lenders may be reluctant to allow you to refinance.
5. Proof of income
When refinancing a mortgage, investors are scrutinized more than homeowners. Investors need to provide more proof of income including tax returns and pay slips, rental income received from the property, etc. In cases where the property has been vacant for a while, or where rental income has been intermittent, some lenders may consider the rent not to be part of your income at all.
Why should you refinance your investment loan with Loans.com.au?
We make it easy to refinance your investment loan, whether you have one or five investment properties. At Loans.com.au, refinancing is as easy as applying online in under two minutes, chatting with one of our loan specialists, and uploading your documents to our onTrack app. After that, you'll sign your loan documents, we'll pay your existing lender, and then you pay!
Our rates are very competitive, starting at 1.99% pa * (compare rate of 2.71% pa *) for our popular Smart Investor Bundle when you get both an investment and a loan occupied by the owner with Loans.com.au, and from 2.99% * (3.01% pa comparison rate *) for our Smart Investor loan. We're here to help as little or as much as you need it, and most importantly, to save thousands of dollars on your investment loan. & # 39; & # 39;
* Conditions apply. The comparison rate is based on a loan of $ 150,000 over 25 years. Please note: this comparison rate is only true for this example and may not include all fees and charges. Different loan terms, fees, or other amounts may result in a different compare rate.
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Marie Mortime r is the Managing Director of Loans.com.au, one of Australia's largest online lenders. Since Marie started the business 10 years ago, Marie has made Loans.com.au into a business with $ 6 billion in home and auto loans. Marie is dedicated to improving financial literacy for all Australians and is passionate about the FinTech industry in Australia. When she's not at work, she enjoys spending time with her husband and two young children.
loans.com.au is an online lender for home and auto loans. For 10 years, Australians trusted the local Loans.com.au team to support them with low mortgage and car loan rates, approved quickly through the online Loans.com app. .au.
