Property investment loans can be hard to comprehend. There are so many different types to consider, with each one offering various pros and cons depending on your approach to investment.
For example, a popular type of property investment loan that many people will consider is known as an interest-only loan. The basic difference between an interest-only loan and a normal mortgage is fairly simple.
With a normal home loan, your regular repayments are paying off the principal of your home loan, while also including an interest charge. Therefore, you're slowly paying off your home loan over a duration of time.
However, with an interest-only loan, the repayments you make are just interest. Therefore, at the end of your home loan period, you'll be expected to pay off the property's balance in full.
The question you may be asking is this – what is the point of that?
The key to a successful interest-only loan is to secure a property that increases in substantial value during the home loan period, allowing you to sell it immediately and earn back however much you spend on the repayments plus a healthy profit.
Naturally, there are a lot of risks involved with this type of approach to property investment. If your property doesn't increase in value enough or – even worse – decreases in value, you will still have to make the repayment in full.
That's why a lot of research and preparation is essential, as well as discussing the decision with a financial expert to understand exactly where you stand.
You can contact a Smartline Mortgage Adviser on 13 14 97 for home loan advice. Or complete our call request form and we'll call you!
DISCLAIMER: The information contained in this article is correct at the time of publishing and is subject to change. It is intended to be of a general nature only. It has been prepared without taking into account any person’s objectives, financial situation or needs. Before acting on this information, Smartline recommends that you consider whether it is appropriate for your circumstances. Smartline recommends that you seek independent legal, financial, and taxation advice before acting on any information in this article.