Why Is Leveraging In Property Lucrative?
Financial leverage refers to borrowing money in order to achieve bigger property growth and investment. It allows an investor to place more money into purchasing an asset than they otherwise would have been able to. Ultimately, this creates the possibility for increased gains.
The bounds for using leverage is that by obtaining serval sources of capital, an investor is able to enhance the prospective return generated on their equity and unlock deals at a scale otherwise inaccessible due to capital constraints.
So how does leveraging in property work?
If you are a first home buyer and you have, for example, applied for a loan of $250,000, you can use this money to purchase an apartment outright. You would then obtain a strong cash flow that an unmortgaged investment would bring in due course. On the other hand, you could use this money to place a deposit on five separate apartments. Presuming that these properties that you purchased were bought in a prime location with the potential for growth and had neutral to positive cash flow, all of these five properties would admirably be looking after themselves in regard to cash flow while also increasing in value in the long term.
Benefits Of Leveraging In Property For A First Home Buyer
- You Get More For Less
In instances where you place all your cash into one investment property, that is it. Whereas, in cases where you leverage in property, you have the option to go for another property. You have the ability to obtain extra mortgages meaning you are able to own several properties. Assuming that each of these properties is acquiring reasonable returns, this would transcribe to more rental income and real estate wealth on your behalf.
- Less Risky
The power of leveraging in property lowers your risk. If you use all of your cash to obtain only one property investment and it does not perform well, it can result in a bad investment decision, and you will be left with nothing. Contrastingly, if you obtain several leveraged properties, you will still be acquiring income in the chance that one or two of your properties perform poorly.
- Tax Benefits
On the occasion that one of your tenants decides to relocate, you will be left to offset the expenses that go along with it. You will certainly be making negative cash flow, but with many investment properties in your portfolio, you will be able to make up this income from the rest of your investments in order to offset such expenses.
Be Smart With Leveraging & Minimise Risk
In order to get the most out of your investment, you should be highly meticulous in minimising your risk and maximising your investment. Here are some tips that investors should follow when leveraging in property.
- Purchase in metro areas where there is a demand for renters and a chance that properties are able to retain their value
- Purchase properties that have a potential for growth
- Buy properties that have a strong yield where they are able to pay themselves off
- Stay away from high-risk investment properties
- Have an exit strategy in place – if you had to sell quickly, would you be able to get your money back?
- Protect yourself against any unexpected costs – an adequate buffer in place, such as 2 months’ worth of rent
- Get a payment you will be able to live with – find a balance between your down payment and your monthly payments
- Be conservative in your appreciation expectation
How Can I Start Leveraging In Property Now?
Our mortgage brokers here at Greenline Home Loans are able to help you with the process of leveraging in property. When it comes to leverage, it is important that you have a clear and precise process and plan in place to figure out how you are going to set out your finances. If you plan on purchasing two investment properties, it is important that you have enough equity that allows you to cover the costs of the deposit, stamp duty as well as the buyer’s agent fees for both purchases.
Reach out to Greenline Home Loans today!
If you are a first home buyer, buying a residential property or wanting an interest-only residential home loan, get in touch with our team of experienced brokers at Greenline Home Loans. We have access to 50 lenders and a strong relationship with several major banks to assist you and offer a solution to suit your needs.
At Greenline Home Loans, we will tailor the best solution for your needs and walk with you hand in hand from the first day you consider leveraging a property. Contact our friendly team of brokers to speak about low-rate home loans on 1800 705 505 to get started today!
Interest-only residential home loans are residential mortgages where your monthly repayments are composed of only the interest that is charged by your lender.
They vary in difference compared to the traditional amortising loans, where monthly repayments are made up of both principal and interest. When both the principal and interest are paid, your loan balance is reduced during your loan term. Since interest is determined by the outstanding balance of your residential home loan, the specified amount of interest that you will be expected to pay will, in turn, also reduce.
On the other hand, when it comes to an interest-only loan, your loan balance during your loan term will not reduce due to the fact that your repayments will only cover the interest on the amount you have borrowed. Your loan balance is not reducing, and hence you will end up paying an increased amount of interest over the period of your loan.
If you are unsure if interest-only residential property loans are the right fit for you, we have outlined a few of the benefits that come along with an interest-only residential loan.
Very Suitable For Construction Loans & Valued-Added Projects
In the instance that an investor is constructing a property, there is a requirement to try and preserve as much cash as you can during the construction phase of the project. Correspondingly, a general construction loan contains a pre-funded interest reserve account from which interest-only repayments are withdrawn whilst the property is under construction. When the property has been built and has been tenanted, the payments of your loan change from interest-only to principal and interest in order to line up with the property’s enhanced income.
This notion is very similar when it comes to value-added projects. Investors have elevated upfront costs to renovate a property, and there is a necessity to utilise their capital for this purpose. Obtaining an interest-only loan is very beneficial for an investor as they are able to conserve their capital until the renovations are completed, and the property is capable enough to produce enough income to gradually write off the initial cost of the loan.
Stabilises & Advances Your Cash Flow
Prospering property investment is all about cash flow. Utilising an interest-only loan can enable you to be more in control of your cash flow over the period of your loan term. To make the most out of the compounding and leverage of your investment property, you need to hold your investment properties for an extended amount of time. Therefore, the only way to do this is by creating financial buffers or cash flow.
Interest-only home loan repayments allow you to pay the merest amount demanded by your loan. This then provides you with extra money in your pocket to pay for any added expenses such as council rates or repairs.
Allows You To Prioritise Your Debt Allocation
Interest-only loans for the purchasing of residential properties are very beneficial as it provides you with the ability to pay off your debt. Interest-only repayments indicate that you are servicing your loan whilst your property advances in value. Furthermore, these interest-only repayments are also deductible from your income, ultimately reducing your tax.
In the meantime, with an interest-only residential loan, you have the ability to pay off any non-deductible debt, such as your credit cards or your car. Paying these debts off should be a priority.
Use Of Offset Accounts Reduce Your Interest-Only Repayments Even Further
An offset account is a simple transaction account that enables you to utilise your surplus cash in order to offset against the interest applicable to your loan. They work by providing you with the ability to transfer any additional savings that you have into an account that is then linked towards your mortgage. This extra cash is used to counteract your mortgage and hence minimises your interest repayment amount.
Proves To Be Very Tax Effective
In Australia, it is acceptable for all investors to claim back any costs that are linked with owning assets, and this does involve interest on residential investment property loans. In regards to property investors, the interest element of their residential property loans is added to the annual costs of retaining a real estate investment. Needless to say, this is offset by the income that is obtained through rent.
Making use of interest-only residential home loans makes it effortless to determine what your annual repayments are.
Reach out to Greenline Home Loans today!
If you have been considering buying your first home, buying a residential property or wanting an interest-only residential home loan, get in touch with our team of experienced brokers at Greenline Home Loans. We have access to 50 lenders and a strong relationship with several major banks to assist you and offer a solution to suit your needs.
At Greenline Home Loans, we will tailor the best solution for your needs and walk with you hand in hand from the first day you consider a construction loan or small business loan. Contact our friendly team of brokers to speak about low-rate home loans on 1800 705 505 to get started today!
At Greenline Home Loans, our aim is to provide the best home loans with the best home loan rates to suit people with various needs. We offer which include residential home loans, residential investment property loans, home loan refinancing, debt consolidation, bridging loans, construction loans and cash out equity release.
Below are some of the best home loans we offer at Greenline Home Loans and the features they offer:
Residential home loans
Applying for a residential home loan can be overwhelming and difficult to understand, that’s why our experienced team at Greenline Home Loans can provide you with all relevant information and assist you in the application process to ensure you have access to the best home loans.
We aim to provide low rate home loans, low fees and increased flexibility to suit your needs and requirements. Our professional brokers have extensive knowledge of Australian residential home loan markets! Get in contact with our friendly team at Greenline for assistance with a residential home loan.
Residential investment property loans
Residential investment property loans are a great option if you are looking to purchase an investment property, or you are looking to expand on the market as an experienced investor! At Greenline Home Loans, we offer low rate home loan options for residential investment property loans along, which have beneficial features such as the loan process being hassle free and convenient as well as having access to cost effective options.
Home loan refinancing
There are several reasons why you may want to refinance your home loans such as debt consolidation, a change in your personal circumstances, wanting to release equity from your property and more. Our home loan refinancing options provide a number of features which include equity access, lower interest rates, flexibility and the ability to reduce the length of your loan.
Our advisers at Greenline Home Loans can assist you with home loan refinancing by customising solutions to fit your requirements and needs with options such as interest-only loan terms, a combination of fixed and variable loans, offset and redraw facilities and guaranteed loans.
Debt consolidation
Debt consolidation will combine all your debts into a single loan or one credit card amount, which may make this a beneficial option if you have been managing multiple loans or credit cards and you are wanting to consolidate them. Debt consolidation will leave you with one loan which means you will now only have one repayment cycle. There are many product features of our debt consolidation at Greenline Home Loans which include a reduction in your costs which will maintain your debts, an improvement in your credit score, a fixed end date and simplified repayments.
If you are wanting to consolidate your debts into a single loan, manage your debt, easily track your repayments, save on loan fees, and interest rates, our team at Greenline Home Loans can assist you!
Bridging loans
A bridging loan can ensure you have time to sell an existing property when purchasing a new home, without the added stress of having to line up, and time settlement dates. There are many features of a bridging loan which include utilising flexible lending criteria, being fast to arrange, utilisation of an interest-only bridging loan and being convenient.
Our team at Greenline can provide you with the lowest bridging loan rates and answer any questions you may have about the loan approval process.
Construction loans
A construction loan is commonly referred to as a drawn-down loan, as the loan is drawn down progressively to pay for each stage of the construction process. Generally, for the first 12 months of the loan the loan is based on an interest only basis, then the loan will generally revert to principal and interest payments. A major benefit of a construction loan for many people is the advantage of managing your cash flow effectively throughout the building stages.
A construction loan generally contains 5 stages which trigger the progression of the draw down. The 5 stages include slab down or the base, frame stage, lockup, fixing and completion. Get in contact with our experienced team at Greenline Home Loans who can assist you with any further questions about the process or information regarding construction loans.
Cash out – equity release
A cash out/equity release may be the best option if you are looking to meet some personal goals such as renovating your home. One of the main benefits of owning your home is being able to have access to the equity in your property and use it as collateral when you are looking to make home improvements such as renovations.
The features of a cash out equity release include prolonged repayment terms, a possibility of tax-deductible interest, lower interest rates and fixed interest.
Reach out to Greenline Home Loans today!
If you have been considering buying your first home, buying a residential property or wanting a residential investment property loan and are looking for the best home loans, get in touch with our team of experienced brokers at Greenline Home Loans. We have access to 50 lenders and a strong relationship with several major banks to assist you and offer a solution to suit your needs.
At Greenline Home Loans we will tailor the best solution for your needs and walk with you hand in hand from the first day you consider a residential home through to the option of home loan refinancing. Contact our friendly team of brokers to speak about low rate home loans on 1800 705 505 to get started today!