Com­pet­i­tive deals on in­tere­stonly loans are still avail­able if you know where to look

Money Magazine Australia - - CON­SUMER FI­NANCE AWARDS 2017 -

The top three placeget­ters here are all mort­gage man­agers. Un­like bro­kers, mort­gage man­agers source funds and ap­prove loans di­rectly, with­out the need to ne­go­ti­ate with another lender. You con­tinue to have a re­la­tion­ship with your mort­gage man­ager through the life of your loan.

James Slack, Canstar’s bank­ing se­nior re­search an­a­lyst, says: “Com­pared with many lenders who have been in­creas­ing rates on in­vest­ment loans, the win­ners in both the non-bank and bank cat­e­gories of­fer sim­i­lar pric­ing to both prop­erty in­vestors and owner-oc­cu­piers.”

Gold win­ner AMO is cer­tainly no ex­cep­tion. “It of­fers value for money across the spec­trum of all its in­vest­ment loans,” says Slack. Its stand­out prod­uct is its two-year fixed loan. “Un­likely many other lenders, AMO is not charg­ing more for in­ter­est-only ver­sus prin­ci­pal and in­ter­est re­pay­ments.”

Aussie comes in at No. 2 with its stan­dard vari­able in­vest­ment loan at 4.49%. Lenders mort­gage in­sur­ance can be bor­rowed and added to the loan but your lend­ing val­u­a­tion ra­tio (LVR) can­not ex­ceed 85%. For home loans with Aussie the LVR can be as high as 95%. Re­draw is avail­able but there is no off­set ac­count.

Homeloans’ Ul­tra Plus loans start from 4.26%. No ap­pli­ca­tion fees or val­u­a­tion fees ap­ply al­though set­tle­ment fees do. In­ter­est-only for up to 10 years is avail­able, al­though there is a loan fee.

While gen­er­ally it makes no sense to pay in­ter­est only on non-tax de­ductible debts such as a home loan, in some cases for in­vest­ment loans it can work. The com­bi­na­tion of neg­a­tive gear­ing and con­ces­sional cap­i­tal gains tax means in­ter­est-only loans can make sound fi­nan­cial sense. But it’s al­ways best to get ad­vice from an ex­pert and be sure you un­der­stand the risks in tak­ing on an in­ter­est-only loan.

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