Investor Loan
Most lending institutions will offer a wide variety of products to borrowers. Some lenders categorise investment loans with their standard loan products and others devise their own loan category.
Advantages
An interest-only investment loan can help you maximise tax deductions and limit your outward cash-flow
Interest rates for investment loans have dropped significantly in recent years to be comparable with many home loan rates
Considerations
Look closely at the benefits provided by a feature and the fee associated with it

Fixed Rate
A fixed rate loan will follow a pre-determined rate of interest for a given time period eg 3 years
Advantages
It can guarantee a maximum repayment for a set period of time
You have protection against rate rises
Provides you with the ability to budget in the long term
Considerations
If the rate goes down, you are stuck paying the higher interest rate
Often fewer facilities including inability to make additional repayments and redraw that money at a later time
Lenders often have high exit penalties if you pay your loan earlier than the fixed period


Variable Rate
A standard variable rate loan often has comparatively low rates of interest and offer features suitable to all types of borrowers. The loan rate will fluctuate depending on the Reserve Bank of Australia’s cash rate.
Advantages
If rates fall, then you are subject to lower repayments
Lenders usually offer lower rates than fixed mortgages
The standard variable loan usually has more features including the ability to make additional repayments and redraw that money at a later time
Considerations
If rates rise, then you are subject to higher repayments
Be careful of variable loans with extremely low advertised rates as they may have less features
If you wish to switch from fixed to variable or vice versa, check out the cost of switching before you go ahead, and check that you really will be saving money.



Line of Credit
A line of credit allows you access to additional funds by drawing on the equity in your home. This type of loan is currently popular due to the increases in home values over the past 5 years in Australia.
Advantages
Increased flexibility to manage the size and timing of your repayments
If your income is paid into it, you will save on interest fees
Considerations
Due to their flexibility, most line of credit loans come at a cost.

Low Doc
Many borrowers used to fall outside of mainstream lenders’ assessment criteria. Non-conforming lenders introduced low doc loans to assist people in this position. Now most mortgage providers including banks realise that a growing number of Australians are self-employed and still able to service a loan. This loan is aimed at self-employed borrowers and requires a lower level of documentation than normal loans.
Advantages
Assists people who are self-employed to get loans
Assists people with irregular income or incomplete financial records to get loans
Allows borrowers to supply alternate documentation than income and savings histories
Open the door to thousands of Australians who have been rejected by mainstream credit providers
Considerations
Due to the perceived higher risk, borrowers may be required to pay higher interest rates
Ensure that you do not borrow more than you can comfortably repay



No Doc
No doc loans are similar to low doc but require even less documentation. The main difference is the amount of documentation required to get a loan. A no doc loan is based on a statement signed by you declaring your business income will ensure you can make the repayments for a loan.
Advantages
Assists self employed people who do not want to disclose their income
Considerations
The competitive nature of the lending market means that more institutions will offer a no doc loan and certain lenders may not properly assess whether you can make the repayments

Equity Release
These types of loans are very new in Australia and are a product primarily directed at the population aged 65 years and over. These include reverse mortgages and soon to be introduced appreciation mortgages. Reverse mortgages unlock the equity value in your home to fund your retirement. Interest repayments are capitalised onto your loan so you do not have to make any payments.
Advantages
Provides you with access to retirement income stream and retain ownership of your home
Considerations
You may end up withdrawing more equity than the value of your home and the bank could then assume ownership of your home. Seek independent financial advice if this type of loan is of interest to you.


And remember, the interest payments on your investment property can be claimed as a tax deduction – but it is important to know what can and can’t be claimed. Please check these out with your accountant.