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How to Finance an Investment Property

Financing an investment property is not the same as financing a property to live in. There are many areas you need to look at in order to maximise the return of the property as well as protection of other assets, namely the home you live in.

For this reason we try to keep the investment property separate from the owner occupier property by ensuring they are not cross securitised and this is where a good broker comes in.

The images below layout the basic investment home loan structure.

Your Home and it's Finance Structure

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Your Home Mortgage

This is your current home with a mortgage against it. We could simply add the value of the 2 properties together and lend you 100% of the purchase price plus costs BUT ! The 2 properties are connected by finance which is controlled by the lender and if anything ever goes wrong they can simply sell both properties if they wish too.

New Home Loan Structure

What we do is withdraw or refinance this loan to extract out enough money for the deposit and fees to purchase the investment property.

It will often involve a completely new loan being setup for the deposit side of the lending and usually a line of credit type loan. This means we can leave a bit of extra in there to cover any future maintenance or other investment requirements.

By having a completely seperate loan you have one statement to give to the accountant each year for the purpose of tax deductions. Any other costs for the property would have come from this loan and are very easily traceable.

The Investment Property and it's Finance Structure

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The Investment Loan

This loan is a completely new loan and is set to Interest Only repayments in order to maintain the tax deductions. Any extra money you have left over goes to paying your home loan down first, not the investment loan.

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