Before purchasing an investment property, it is recommended that you understand what you can and can’t afford. Funding Options is an Adelaide-based finance company giving clients access to the most competitive loans and expert advice.  

We speak to Managing Director Dom Cassisi about what you should consider before purchasing an investment property and what to expect when visiting a broker for the first time. 

What happens when I visit Funding Options for the first time? 

The team will determine your buying capacity and analyse how much you should spend on your investment property. People should have a clear vision of how much they want to spend so that we can properly match them with a loan suitable to their current financial situation. 

What kind of loans are offered at Funding Options? 

Loans can vary from person to person. They can depend on how simple people want their loan product to be and whether they need a certain amount of flexibility. We will give advice on interest rates to see if you are better off with a fixed or variable loan or a mix of these. 

What is the difference between a fixed loan and variable loan? 

 A fixed home loan is where you lock in the interest rate with the bank for a period of time (usually one to five years). This type of loan will give investors more certainty of the money they will need to pay the bank each month as they don’t fluctuate. However, this type of loan will not get benefits if interest rates go down. You might also have to pay costs in the event you decide to cancel the agreement.  

A variable loan is where the bank can change interest rates and has no lock-in term. This gives investors more flexibility with the property and will allow them to pay off the loan faster while adapting to changing needs. The risk of variable loans is that the interest rate can change at any time. This means the amount you pay the bank can go up unexpectedly and make it difficult to stay within a budget. 

What is the difference between an Interest Only Loan and Interest Plus Principal Loan? 

An Interest Only Loan is where you are required to pay the bank the interest on the loan. Think of this like a monthly fee the bank charges you for borrowing money. Interest Plus Principle Loans are where you pay the interest to the bank (the monthly fee) plus an additional monthly cost that will start reducing the amount you owe the bank (that is, you start paying back the money you borrowed). 

What is the benefit of owning an investment property? 

Investing in property can be helpful in growing long-term wealth with rental returns from multiple homes. It also has some added tax benefits. Some of the costs involved in owning an investment property can also be tax deductible. 

For more information on what Funding Options can do for you, visit their website here.