Interest-Only Investment Loans

Interest-Only Home Loan FAQs 

What is an interest-only investment home loan?

An interest-only investment home loan is a type of loan where the borrower only makes payments on the interest charged on the loan, rather than making payments on the principal (the amount borrowed). This type of loan is commonly used by investors who are looking to maximise their cash flow by minimising their monthly repayments.

With an interest-only investment loan, the borrower only pays the interest on the loan for a specified period, typically between one and five years. After this period, the loan will revert to a principal and interest loan, where the borrower will start paying both the principal and interest on the loan.

It’s also important to note that investment loan interest-only rates may be higher compared to principal and interest loans.

It's advisable to speak with a lending specialist who can guide you through the home loan application process and provide you with tailored advice regarding investment loan interest-only rates. At Qudos Bank, we have a team of experienced lending specialists who can assist you with any questions you may have regarding interest-only investment home loan offers.

How does an investment loan compare to other mortgages?

An investment loan is a type of mortgage that is specifically designed for individuals who are looking to purchase an investment property, such as a rental property, rather than a primary residence. Some of the key ways in which interest-only loans for investment properties may differ from other mortgages include:

• Interest rates: Investment loan interest-only rates may be higher compared to other types of mortgages.
• LVR requirements: Lenders may require a lower loan-to-value ratio (LVR) for investment interest-only loans compared to owner-occupied loans when asking to borrow more than 80% of the property value, meaning that borrowers may need to provide a larger deposit.
• Eligibility criteria: The eligibility criteria for investment loans may be stricter compared to other types of mortgages, as lenders may take into account factors such as the borrower's income, credit score, and employment history.
• Tax implications*: Interest paid on an investment loan may be tax-deductible.
• Loan features: Investment loans may offer different features compared to other types of mortgages, such as interest-only re-payments or the ability to use rental income to service the loan.

If you're looking for the best interest-only investment loan features and rates, be sure to discuss your individual circumstances and options with a lending expert. Qudos Bank’s lending specialists can provide you with tailored options to help you achieve your investment goals while minimising your interest costs. Get in contact with our team today to find out more about our options and interest-only investment loan rates.

What is the difference between owner-occupied and investment loans?

Owner-occupied loans and investment loans are two different types of mortgages that are designed for different purposes. There are several key differences, including:

• Purpose: Owner-occupied loans are used to purchase a primary residence, whereas investment loans are used to purchase an investment property, such as a rental property.
• Interest rates: Interest rates on owner-occupied loans are typically lower compared to investment loans, as lenders view owner-occupied properties as less risky.
• Loan-to-value ratio (LVR) requirements: Lenders may require a lower LVR for investment loans compared to owner-occupied loans, meaning that borrowers may need to provide a larger deposit for investment loans.
• Tax implications*: Interest paid on an investment loan may be tax-deductible.
• Loan features: Investment loans may offer different features compared to owner-occupier loans, such as interest-only repayments.

What are the advantages of an interest-only investment home loan?

An investment interest-only home loan can offer several advantages for borrowers, including:

• Lower monthly repayments: With an interest-only loan, the borrower is only required to pay the interest charged on the loan each month, rather than making payments on the principal amount borrowed. This may result in lower monthly repayments, which could help to improve cash flow and provide flexibility for investors. Our repayments calculator can help you get a clear understanding of how much you'll need to pay each month, as well as the total amount you'll pay over the life of the loan.
• Investment strategy: An interest-only investment loan can be a useful tool for investors who are looking to maximise their cash flow and use their funds for other investment opportunities, rather than paying down the principal on their loan.
• Ability to manage cash flow: By minimising their monthly repayments, investors can improve their ability to manage their cash flow and cover other expenses, such as property maintenance or renovations.
• Potential for capital growth: Investors who use an interest-only investment loan can potentially benefit from any capital growth in the property market, as they can reinvest the savings from their lower monthly repayments into other investments.

It's important to note that interest-only investment loans may also have some disadvantages, such as higher interest rates. It's advisable to speak with a lending specialist who can guide you through the process as you compare home loans.

At Qudos Bank, we have a team of experienced lending specialists who can assist you with any questions you may have regarding interest-only loans for investment properties. Contact Qudos Bank today to speak with a financial expert who can provide you with tailored options based on your individual circumstances.

How does an interest-only investment home loan affect my borrowing power?

 An interest-only investment loan can affect your borrowing power as lenders will take into account the higher risk associated with these types of loans. Some factors that can impact your borrowing power are:

• Higher interest rates: Interest-only investment loan rates are typically higher compared to principal and interest home loans, which can reduce your borrowing power.
• Stricter eligibility criteria: Lenders may have stricter eligibility criteria for interest-only investment home loans, such as higher income requirements or more stringent credit history checks. This can make it more difficult to qualify for a loan and can also impact your borrowing power.