When buying an investment property, understanding the fees and costs associated with variable rate investment loans is crucial for your property investment strategy. Variable interest rate loans offer flexibility but come with various charges that can impact your overall borrowing capacity and rental yield calculations.
Understanding Variable Rate Investment Loans
Variable interest rate investment loans have rates that fluctuate with market conditions. Unlike fixed interest rate options, these loans allow you to benefit from rate decreases while exposing you to potential increases. This flexibility makes them popular among investors building an investment property portfolio.
The loan amount you can access depends on several factors including your income, existing debts, and the loan to value ratio (LVR) of your chosen property. Whether you're purchasing a town house, apartment, or stand alone dwelling, lenders assess your application based on the property's rental potential and your financial position.
Common Fees and Costs
When applying for an investment loan, you'll encounter various fees that affect the total cost of your rental property loan:
Application and Processing Fees
- Application fees typically range from $300 to $800
- Valuation fees for property assessment ($300-$600)
- Settlement fees charged by lenders ($150-$800)
- Legal fees for documentation review
Ongoing Costs
- Monthly or annual account keeping fees ($10-$30 monthly)
- Redraw facility fees if accessing extra payments
- Statement fees for paper statements
Lenders Mortgage Insurance (LMI)
Lenders mortgage insurance (LMI) becomes necessary when your LVR exceeds 80%. This insurance protects the lender if you default on payments. LMI costs vary significantly based on your loan amount and LVR, potentially adding thousands to your upfront costs.
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Additional Investment Property Costs
Beyond loan fees, consider these property-related expenses:
- Stamp duty: Varies by state and property value
- Building and pest inspections: $400-$800
- Legal conveyancing fees: $1,200-$2,500
- Property management fees: 6-10% of rental income
Interest Rate Discounts and Negotiations
Many lenders offer interest rate discounts based on your loan amount, LVR, and relationship with the institution. Professional package discounts can reduce rates by 0.1% to 0.7% annually. However, these packages often include annual fees that may offset savings for smaller loan amounts.
When research property options and comparing lenders, consider the total cost including fees rather than focusing solely on the advertised rate.
Investment Loan Application Process
The investment loan application requires comprehensive documentation:
- Income verification: Pay slips, tax returns, bank statements
- Property details: Contract of sale, rental appraisal
- Financial position: Assets, liabilities, existing loan commitments
- Investment experience: Previous property investments or rental history
A streamlined application process helps reduce delays, particularly important in competitive property markets where quick settlement may be required.
Calculating Investment Loan Repayments
Calculating investment loan repayments involves considering the Investment Loan Interest Rate, loan term, and repayment structure. Interest-only repayments are common for investment properties, allowing investors to maximise negative gearing benefits while maintaining cash flow.
Rental yield calculations should factor in all costs including loan fees, property management, maintenance, and insurance. This comprehensive approach ensures realistic return expectations.
Accessing Investment Loan Options
Empire Road Investments can help you access Investment Loan options from banks and lenders across Australia. Our team understands the nuances of investment lending and can guide you through comparing different lenders' fee structures.
Whether you're purchasing your first investment property or expanding an existing portfolio, professional advice helps identify suitable investment loan options that align with your financial goals.
Making Informed Decisions
Successful property investment requires understanding all associated costs, not just the headline interest rate. Variable rate loans offer flexibility but require ongoing monitoring of rate movements and their impact on your cash flow.
Consider how fees affect your overall investment return and ensure your borrowing capacity allows for potential rate increases. Professional mortgage broking services can help structure your investment loan application to maximise approval chances while minimising unnecessary costs.
Invest in real estate with confidence by understanding the full cost structure of variable rate investment loans. From application fees to ongoing charges, each component affects your property investment's profitability.
Call one of our team or book an appointment at a time that works for you to discuss your investment loan requirements and explore suitable options across our lender panel.