How investment loans can work for you
- Posted in Managing a Loan
These days, everyone is looking to make investments as a means of securing their long-term financial future.
With Pepper, you may still be eligible for an investment loan even if you have impaired credit or are self-employed, provided Pepper is satisfied that your application otherwise complies with its normal credit assessment and the loan suits your needs.
How investment loans work
Loans for investors work somewhat differently to a home loan for a property you intend to live in. Part of the reason is of course that an investment will generate income for you, so that income can be factored into your ability to service the loan.
Keep in mind all the additional costs associated with buying a property when planning for your investment, such as stamp duty, strata fees and land tax.
Know the risks before you start
Any form of investing has a level of risk, and borrowing to fund an investment property has an added level of risk to it. So that means you need to be prepared to really do your homework to ensure your investment is a good one.
Also, make sure you can repay any investment property loan you take out, even if that investment underperforms. Check out the government’s MoneySmart website for more information on the pros and cons of borrowing to invest.
Negative gearing occurs when the income from an investment property is less than the costs of owning the property, such as mortgage repayments and maintenance costs. Negative gearing can have tax consequences so we recommend you speak to your accountant or tax adviser to get more information and determine whether it is an appropriate strategy which suits your particular financial situation, objectives and needs.
Self-Managed Super Funds (SMSF)
A SMSF is a ‘do-it-yourself’ superannuation fund (DIY fund) which can have up to four members, all of whom are generally the trustees of the SMSF. SMSFs can be used to invest in a range of assets, including property, and are regulated by the ATO. The rules for setting up and investing via an SMSF are complex and subject to change; and the benefits which can be derived from setting up an SMSF are particular to your circumstances, so we definitely recommend you speak to your accountant or tax adviser to get more information and determine whether this strategy suits your needs.
If you are interested in finding out about Pepper’s home loans for investors speak to a Lending Specialist on 13 73 77 or try our Home Loan Pre-Approval Tool to find out how much you could borrow.