Investment Property Variable Rate Loans Guide

Understanding Variable Rate Investment Loans

When you're looking at buying an investment property, choosing the right loan structure is crucial for your property investment strategy. Variable interest rate loans offer flexibility that many property investors find appealing, especially in changing market conditions.

Variable rate investment loans allow your interest rate to move up or down based on market conditions and lender decisions. This means your rental property loan repayments can change throughout the loan term, which requires careful planning when calculating investment loan repayments.

Key Features of Variable Rate Investment Loans

Variable rate investment property loans come with several features that can benefit your investment property portfolio:

• Redraw facilities - Access any extra repayments you've made
• Offset accounts - Link transaction accounts to reduce interest charges
• Split loan options - Combine variable and fixed interest rate portions
• Interest-only repayment periods - Lower initial repayments to maximise cash flow
• Portability - Transfer your loan to a different property

These property investment loan features can help you manage your borrowing capacity more effectively across multiple properties.

Loan to Value Ratio and Lenders Mortgage Insurance

When applying for an investment loan, lenders typically require a lower loan to value ratio (LVR) compared to owner-occupier loans. Most lenders cap investment loans at 80% LVR, though some may lend up to 90% with lenders mortgage insurance (LMI).

For your first investment property, you'll generally need:
• At least 20% deposit plus costs
• Proof of rental income potential
• Strong serviceability across all debts
• Clean credit history

Investment Loan Interest Rate Considerations

Investment loan interest rates are typically higher than owner-occupier rates. However, this difference can be offset through negative gearing benefits, where loan interest and property expenses exceed rental income, creating a tax deduction.

When researching property and loan options, consider:

1. Rental yield - Annual rent as a percentage of property value
2. Capital growth potential - Long-term property value increases
3. Interest rate discounts - Available through mortgage brokers
4. Total borrowing costs - Including fees and charges

Property Types and Investment Strategies

Your choice between a town house, apartment, or stand alone dwelling affects both your loan terms and investment returns. Each property type has different:

• Maintenance requirements affecting cash flow
• Growth potential in your local property market
• Rental demand impacting vacancy rates
• Strata fees (for apartments and townhouses)

When buying a rental property, consider the total cost including stamp duty, legal fees, and building inspections alongside your loan amount.

Streamlined Application Process

The investment loan application process involves providing comprehensive financial documentation. Your investment loan application typically requires:

• Recent bank statements (usually 3-6 months)
• Tax returns and notice of assessments
• Employment verification
• Existing loan statements
• Property details and rental assessment

Working with experienced mortgage brokers who can access investment loan options from banks and lenders across Australia often results in a more streamlined application process and better loan terms.

Managing Variable Rate Fluctuations

Since variable rates can change, it's important to:

1. Budget for rate rises - Calculate repayments at higher rates
2. Monitor market conditions - Stay informed about rate movements
3. Consider refinancing options - Review your loan annually
4. Maintain cash reserves - Cover unexpected costs or rate increases

Regular loan health checks can help ensure your investment loan remains suitable for your financial situation and investment goals.

Variable rate investment loans offer flexibility and features that can enhance your property investment strategy. Whether you're purchasing your first investment property or expanding an existing portfolio, understanding these loan terms helps you make informed decisions.

To explore investment loan options tailored to your situation, call one of our team at Premier Path Finance or book an appointment at a time that works for you. Our experienced mortgage brokers can help you access competitive investment loan options and guide you through the application process.