The time has never been better to refinance your investment property with the Federal Government once again encouraging lending and planning to relax the strict lending laws to try to boost the economy. We are blessed with record-low interest rates for borrowing while banks are courting borrowers who need to free up their cash flow due to the pandemic with some amazing offers.
Canstar data reveals 14 per cent of Australian mortgage holders switched lenders this year in pursuit of a lower interest rate. Lenders are engaged in highly competitive practices that are attracting new borrowers and many offer home loan special offers that include cashback incentives, gift vouchers, and other rewards for borrowers.
Whether you are a first-time investor or own multiple investment properties, it is worth exploring your refinancing options before rates rise again. For example, you might find it useful to swap or revert to an interest-only loan to take maximum advantage of the tax deductions for your investment property loan.
Where to find the latest offers
Mortgage lending is a crowded and competitive industry with lenders tossing about deals that can be quite tempting for borrowers. However, before you leap into refinancing, make sure the deal is right for your borrowing needs.
Two great resources for comparing current borrowing deals are Canstar and Finder.com.au. Both sites offer borrower calculators that quickly compare refinancing options available from lenders in their area. They pretty much take all the hard work out of comparing loans and features.
Canstar also provides a chart with a compilation of home loan cashback sales and promotions by lender. Each entry in the chart includes a summary of the deal, the conditions borrowers must meet to qualify, and the expiry date for applying. A second chart on Canstar contains data on other sales and promotions as well as rewards points, reduced rates, and lower fees.
Canstar’s Home Loan Star Ratings feature ranks home loan products and lenders and is a great resource for borrowers. Finder has a similar awards system that analyses products and awards stand-out products in several categories.
Refinancing your home loan for an investment property
It’s normal practice to use the equity in your property to buy an investment property. Equity is a powerful tool when building a property portfolio as you don’t need to have paid off your home before borrowing. For instance, if you own a property worth $750,000 and still owe $250,000, you have $500,000 in equity.
There are some risks associated with refinancing to invest in a property. One of the biggest risks is depreciation. If the property value declines, it can be difficult to build up further equity, which can worsen your financial situation. Work with an experienced real estate agent who can identify locations that are likely to provide capital gain. We’re lucky on the Balmain peninsula that properties tend to hold their value but, as with any group of suburbs, there are pockets we need to watch.
Becoming a first-time investor
If you are considering becoming a property investor for the first time, there is a lot of advice available on how to get started. Build a plan that outlines your goals for property investment, and ensure you have a solid financial plan. Tips that can make your first-time experience smoother include:
- Focusing on financial investment strategy rather than emotions to avoid paying more for a property than it is worth
- Searching for a property that is suitable for the market to open yourself up to the largest pool of renters available
Getting started
Do not wait until it is too late. Some of these amazing deals come with expiration dates. If you are a property investor, consider whether refinancing your investment property is the right move for you.
Looking for help selling your home or renting your investment property? Our team at Belle Property Balmain support homeowners across Balmain, Balmain East, Birchgrove, Rozelle and Lilyfield. Feel free to get in touch for a no-obligation discussion or property appraisal.
