Investment Loans for Real Estate Beginners

What is a real estate investment loan? How does it differ from other types of loans? And why should I consider using them instead of conventional mortgages?

Real estate investment loans are becoming increasingly common. They allow investors to leverage their property assets into cash without having to sell them.

If you want to invest in real estate and are looking to get an investment loan, stay with us and we will answer some of the most common questions around investment loans and property value like how do investment property loans work, interest rates for investment loans, and whether investment loans are worth considering.

What are investment loans?

Investment loans work similarly to a traditional home loan. You see a property you want to invest in, and you take out a loan and use the funds to secure the property.

There are key differences, however, between investment loans and a traditional home loan:

You cannot occupy the property.
you will pay bigger stamp duty fees and interest rates.
you can write off the fees and interest as tax deductible as long as you do not occupy the property.
You will not be eligible for government incentives as a first time investor.
You earn side-income from property rental as an investor.

How do investment loans work?

There are two types of investment loans:

Interest-only loans

Investment loans of this type delay the repayment of the borrowed amount or the ‘principle’ for a fixed term. You will only be paying the interest rates on investment loans excluding the principal. An interest-only loan then transitions into a principal and interest loan at the end of that fixed term.

Principal and interest loans

Principal and interest (P&I) loans require the borrower to pay both principal and interest in their monthly repayments. With each repayment, the borrower will pay less and less on interest as they are essentially chipping away at the balance owed at the start, and more and more on the principal.

Talk to an investment loan specialist

What is the interest rate on investment property loans?

As of August 2022, the average variable investment loan rate is 4.63%, while the lowest is 3.24%. The average fixed investment loan rate is 5.71%, while the lowest is 3.99%

It is important to note that rates for investment property loans fluctuate just as much as the rates of standard home loans. However, they are more likely to be higher due to the fact that you are more likely to default on an investment loan than on a loan for a home you primarily occupy.

In short, from a lender’s perspective, the perceived risk in investment loans is higher than that of a traditional mortgage.

How to get loans for investment properties: step-by-step guide

Secure your deposit

With investment loans how much deposit you can secure will determine how much you can borrow, much like with a conventional mortgage. A 20% deposit of the price of the property immediately qualifies you for a lot of investment loans. If you don’t have enough deposit saved, you can talk to your mortgage broker to check your alternatives.

Use your home equity

You may have built enough equity in your home that you already own. You can tap into it to secure a home loan. Generally, lenders are happy to lend up to 80% of a home’s value. This means your usable equity is 80% of your home value, minus any existing debt. Below is a sample calculation of your usable equity:

$750,000 (home value) * 80% = $600,000 – $350,000 (current mortgage) = $250,000 (usable equity).

Read: How to use equity to buy an investment property

Also read: How much equity do I need for an investment property?

Get yourself a guarantor

You can ask a family member or your spouse who has equity in a property they own to act as your guarantor.

Seek help from your parents

You can obtain a cash gift deposit from your parents (if they have the means) and this can help you purchase your investment property. Lenders will consider this as a form of genuine savings since you are in no obligation to pay the money back.

How many investment property loans can I have?

You can take out as many investment loans as you can handle, as long as you are able to comply with the documentation requirements and deposit amount for each property.

Ready to take the next step?

If you’re ready to invest in a property, or turn your home into an investment, feel free to message the home loan experts at Sunshine Coast Financial Solutions.

Give us a ring on (07) 5437 9073 or schedule an appointment with us to discuss your options.

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Dani Bee

I simply reached out to SCFS and asked them to find me a better rate on my home loan with a bigger institution. They did all the work for me. A tiny bit of reading and signing and voila….. i now have a MUCH better rate which literally saves my hundreds every week. Thanks for making such an otherwise daunting activity so so easy. Will definitely use your services again in the future.

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kelsee stevens

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Very professional business to deal with.Would highly reccomend.

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Daryl was so helpful and I found the whole process simple and easy. I would highly recommend SCF Solutions if you are looking to secure finance.

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Adam and the team at SCFS were great to deal with, prompt and made the whole situation easy for us, couldn’t rate them any higher!Thank you all for your work in helping us secure our new property

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Your search for mortgage brokers stops here. Daryl, Shanina and Chris we’re exceptional and will be our mortgage brokers whenever we decide to purchase a property. Professional, honest, reliable and experts in their field. They were a safe pair of hands to guiding us through the buying process.

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I have used the Team at SCF numerous times now. Always professional, friendly and Fast!Can not recommend this team highly enough.

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Adam and the team at SCF made the process so easy and seamless. We had a tight timeline and they sorted it out virtually stress free. Very knowledgeable, professional and wouldn’t hesitate to recommend. Thanks Team!

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Daryl and the whole team at SCFS have been incredible! From our first pre approval meeting through to securing a property days after auction, they have been supportive, realistic and professional. One of the real standouts is the speed at which Daryl has been able to act and his calm, friendly, down to earth nature at every turn of the way. To us, these traits made all the difference when things moved quickly. Without question we would recommend SCFS to anyone looking for a broker and we will be life long clients.

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Ryan Hall

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Lang Family

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Thanks heaps to Adam & Shanina for all your help & knowledge with refinancing our home loan. They went above & beyond to find us the best rate that suited our needs. Excellent communication & both Adam & Shanina made the whole process super easy. Would highly recommend SCF Solutions!

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Our fourth time having the pleasure of dealing with Chris and his amazing team. It just gets easier every purchase! The communication was fantastic, we were updated throughout the process and felt confident that we were getting the best interest rate possible. Thank you again SCF Solutions, I can see why you’re winning so many awards. I will be referring you into our friends and family.

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Highly recommend Chris and his team, as the are very responsive and gets the job done. Thank you guys for all your support through the past few years. Looking forward to work with you again in the future....Marie

C G

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Tegan Densem

We just worked with Adam at SCFS, and we couldn't be happier. Our mortgage situation was a bit tricky, but Adam and the SCFS team were there every step of the way. Adam was super quick to respond and always up for a call to clear things up.As first-time buyers, we really appreciated Adam holding our hands through the whole process. The team was proactive in finding the best solutions for us and handled any issues before they became problems.We highly recommend Adam and SCFS for anyone needing mortgage help. They made the whole thing smooth and stress-free. 10/10 recommend!

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We have been working with Chris and his team for some time now and he and Adam have recently secured a home loan for my partner and I on our recent purchase. Chris and Adam have made the process super easy and took the time to methodically consider all possible options for us. Have also appreciated SCFS’ pragmatic approach. Thanks Chris and Adam for another great outcome!

MSM Account

I’ve recently had the pleasure of working with the team at Sunshine Coast Financial Solutions to secure a new mortgage. Throughout the entire process, communication was clear, professional & friendly. I was kept up to date and was well informed every step of the way. I wholeheartedly recommend Sunshine Coast Financial Solutions to anyone in need of expert mortgage advice & assistance.

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This is the 3rd time we have used SCFS, this time for an investment property and refinance overall.Chris advised us to what our best options were taking into account taxable nature of investment and how best we structure between that and our owner occupied.The team at SCFS found us a much better rate overall and have infact reduced our monthly payments.Chris and team (Adam, Darryl, Shanina) keep you updated every step of the way and make the process seamless and easy even when we have had more complicated lending requirements.We have had the pleasure of referring several of our friends to SCFS who have been equally impressed. We are based in NSW, and absolutely no issues being in a different state.If you are after a personal service, and one that continues to proactively manage the best deal for you ongoing this team will look after you.

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The experience we had with Sunshine Coast Financial Services was incredible. They were professional, knowledgeable and reassuring from the start of our house purchasing journey right to the finish.Apart from all the team, we were lucky enough to have Daryl Hermann assisting us.He was so positive, helpful, encouraging and always happy to answer any questions that I had and there was plenty….Thanks to SCFS we are now the proud owners of a home we could only have dreamt of.Without a shadow of doubt I would highly recommend anyone looking to purchase a home to give these guys a call.I know I certainly will when I choose to purchase another property.

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Just wanted to thank Chris Wilson and Tracey Butler for looking after me again with my home loan. My fixed rate is expiring soon. Weeks ago Chris contacted me to discuss my options, the process and a plan of attack.Tracey diligently stepped in right on cue and executed the plan with a superb outcome. A better than expected interest rate, not just for now but for the future of my home loan. I couldn't be happier.This team makes you feel like they step into their customers shoes as if it was their own home loan. They strive to do everything they can for their customers and in such a friendly and professional manner. Thank you again Chris and Tracey.

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Matt Trist (Mainland251)

What a treat it was to work with Chris and his team, they are extremely professional and we're able to find me a much better deal on my home loan. I'm now saving thousands each year! I couldn't recommend him highly enough 👍

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Sunshine Coast Financial Solutions worked magic for this first home buyer. The home-buying process is very daunting for newcomers, when searching for your dream home it's hard to know the usual steps and who to trust. Chris and Adam from SC Financial Solutions provided professionalism and attention to detail each step of the way, helping to relieve stress and bring peace of mind knowing we were in safe hands throughout this life changing decision. I'll recommend SC Financial Solutions to everyone searching for an award-winning knowledgeable, reliable and responsive brokerage team.

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This new homeowner is thrilled to leave a review for Chris and his colleague Adam at Sunshine Coast Financial Solutions. These mortgage wizards worked their magic on a loan for me, comparing all leading banks of Australia, with a great result. Their efficiency and advice meant I could make a fast and easy settlement. Chris and his team have made our first home buying experience so much easier.If you need a mortgage, I couldn’t recommend enough🌞🏡 Sunshine Coast Financial Solutions 🌞🏡

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Today is approval day something I did not think I would be doing in this day and age with how life has been but thanks to the team at SCFS it's all been made possible and easy couldn't recommend a greater team, will definitely be using them for my next few houses

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