Purchasing an investment property will most likely require an additional home loan. There are a range of loans potential investors can take advantage of aside from the standard variable and fixed rate home loans. We have listed a few of the most common loan types to give you a basic understanding of the options available to investors.
Bridging Home Loans
These are short term loans used to ‘bridge’ the gap between your existing and future mortgages. Borrowers leverage the existing equity in their current property as a down payment. These loans will incur higher fees than normal and are usually only used in pressing circumstances.
These loans draw funds from Self-Managed Super Funds (SMSF) and require more complex documentation than regular home loans. The loan uses a limited recourse borrowing arrangement, meaning if you default the lender is only entitled to the asset in question.
Bad Credit Loans
These loans are offered to borrowers with bad credit scores and usually incur higher fees and rates. Borrowers will likely be charged with Lenders Mortgage Insurance (LMI).
Low Doc Loans
Short for low documentation, these loans are for individuals who are unable to sufficiently prove their income through salaries or wages. Usually full time investors or the self-employed, they require less documentation in return for higher rates and fees.
Package Home Loans
Package loans are available to borrowers who bundle all their financial products under the same lender. Such as your credit card and savings account. These loans offer discounted interest rates and fees in return.
Construction Home Loans
A loan option specifically tailored to renovations and construction. This loan is given in increments which are usually determined by builder invoices. This can be useful for individuals whose are planning on renovating or flipping as an investment strategy.