As a clinical nurse specialist, your steady income and professional standing position you well for buying an investment property. However, understanding different investment loan structures is crucial for maximising your property investment strategy and building a successful investment property portfolio.
Understanding Investment Loan Structures
Investment loan structures determine how you borrow money to purchase rental property and can significantly impact your tax position, borrowing capacity, and overall returns. The structure you choose affects everything from rental yield calculations to negative gearing benefits.
When applying for an investment loan, lenders assess your application differently than owner-occupier loans. They typically require higher deposits, charge different interest rates, and have stricter serviceability criteria. Understanding these differences helps you prepare a stronger investment loan application.
Principal and Interest vs Interest-Only Loans
Most investment property loans offer two repayment structures:
• Principal and Interest: You pay both loan principal and interest each month, gradually reducing the loan amount over time
• Interest-Only: You pay only interest for a set period (typically 1-5 years), keeping monthly repayments lower initially
Interest-only periods can improve cash flow during the early years of ownership, particularly valuable when rental income doesn't cover all property expenses. However, repayments increase significantly when the interest-only period ends.
Loan to Value Ratio Considerations
The loan to value ratio (LVR) represents how much you borrow compared to the property's value. Most lenders offer investment loans up to 80% LVR without requiring lenders mortgage insurance (LMI). Borrowing above 80% LVR means paying LMI, which adds to your upfront costs.
For clinical nurse specialists, maintaining an LVR below 80% often provides:
• Access to better interest rate discounts
• More investment loan options from various lenders
• Reduced ongoing costs
• Greater borrowing capacity for future purchases
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Variable vs Fixed Interest Rate Options
Choosing between variable interest rate and fixed interest rate options affects your repayment stability and potential savings:
Variable Interest Rates:
• Fluctuate with market conditions
• Often start lower than fixed rates
• Allow extra repayments without penalties
• Provide flexibility for offset account features
Fixed Interest Rates:
• Remain constant for the fixed period
• Provide repayment certainty
• Protect against rising interest rates
• May have restrictions on extra payments
Many investors choose split loans, fixing part of their loan amount while keeping the remainder variable.
Property Type Considerations
Lenders assess different property types differently when calculating investment loan repayments:
• Stand alone dwelling: Generally preferred by lenders, often attracting lower interest rates
• Town house: Usually treated similarly to houses by most lenders
• Apartment: May attract higher interest rates or lower LVR limits, particularly in oversupplied markets
When you research property options, consider how your choice affects borrowing terms and rental yield potential.
Structuring for Tax Efficiency
Negative gearing allows you to claim rental property losses against your other income, including your nursing salary. This tax strategy can be particularly valuable for clinical nurse specialists in higher tax brackets.
To maximise negative gearing benefits:
• Keep investment loan interest rates as high as legally possible
• Pay down non-deductible debt (like your home loan) before investment debt
• Maintain detailed records of all investment-related expenses
• Consider professional property investment strategy advice
Application Process Requirements
The streamlined application process for investment loans typically requires:
• Recent bank statements (usually 3-6 months)
• Employment verification and payslips
• Tax returns and financial statements
• Details of the property you're purchasing
• Information about existing debts and assets
Having these documents ready accelerates your application and demonstrates your preparedness to lenders.
Building Your Investment Property Portfolio
Once you've purchased your first investment property, the chosen loan structure affects your ability to expand. Lenders assess your entire investment property portfolio when considering additional lending, making initial structure decisions increasingly important.
Consider how each property fits into your broader investment strategy, including factors like rental yield expectations, capital growth potential, and ongoing serviceability.
Access investment loan options from banks and lenders across Australia through experienced mortgage brokers who understand the healthcare sector. They can help structure loans to suit your specific circumstances, whether you're buying your first rental property or expanding an existing portfolio.
Remember to factor in additional costs like stamp duty, property management fees, and maintenance when calculating your investment returns. These expenses affect your overall property investment strategy and should influence your loan structure decisions.
Call one of our team or book an appointment at a time that works for you to discuss how different investment loan structures can support your property investment goals.
