Thinking about refinancing an investment property? You’re not alone. Numerous property investors throughout Australia are looking into refinancing as a means of increasing their returns and enhancing their financial situation.
Yes, you can refinance an investment property. It’s just a bit different from refinancing a primary residence home. At Loan Junction, we’re here to guide you through the most important steps and help you make knowledgeable decisions along the way. Let’s get started on investment property refinance.
Step-by-Step Guide to Investment Property Refinance
1. Gather All the Right Documents
Before starting, prepare the following documents:
- Your income proof (tax returns/payslips)
- Lease agreements showing rental income
- Proof of home insurance
- Property ownership records and existing loan statements
This helps lenders assess your eligibility and ensures a smoother process.
2. Compare Lenders
It is important to find the correct lender. That’s where a mortgage broker such as Loan Junction comes in.
We work with dozens of lenders and hundreds of loan products. Our experts will match you with the best deal for your situation, whether you’re switching lenders or staying with your current one.
3. Refinance and Finalise
Once you choose a lender, your broker will handle the paperwork. All you need to do is review and sign the new loan documents. After settlement, your new loan replaces the old one, and you can begin enjoying the benefits.
How Much Can You Save with Investment Property Refinance?
Saving of money is one of the key reasons for choosing the option of refinancing an investment property. Use our Loan Junction refinance calculator to estimate your potential savings. It takes the guesswork out and helps you decide based on real numbers.
For tailored advice, our group of mortgage brokers are just a call away.
Tips to Get a Better Rate
You are likely to get a more competitive interest rate if:
- Your property is well-maintained and rentable
- You have built strong equity of 20% or more
- You have a healthy credit score
Even if you don’t tick all the boxes, there are still options available. A good mortgage broker will help you find the best possible rate based on your current financial profile.
Pitfalls to Avoid When Refinancing Investment Property
Honeymoon Rates
Some lenders offer tempting low rates for the first year. But after that, the rate can jump significantly. Always check what happens after the intro period ends.
Flashy Loan Offers
Cashback deals, waived fees, or bundled products may look great. But you need to focus on the total cost over time and not just the upfront rewards offered.
Overhyped Tax Claims
Generally, refinancing the investment property offers tax benefits. But don’t rely on marketing hype. Speak to a tax agent to understand what deductions apply to you.
Refinancing Too Early
It should be clearly thought through before you go for the option of refinancing your investment property too early. This may end up being an expensive choice. In case of current availed loan more than 80% of the property value, you are more likely to pay the Lenders Mortgage Insurance (LMI), which can be quite expensive.
Why Refinance an Investment Property?
- Improve Your Financial Position: Your initial loan came with a high interest rate or fewer benefits. Refinancing may help to reduce your payments and open up loan terms which may be more favourable.
- Consolidate Debts: You might be able to roll your credit card balances or personal loans into your home loan. This can lower the total interest you pay and simplify your finances with just one regular repayment.
- Add Useful Loan Features: Need an offset account or redraw facility? Refinancing gives you the chance to upgrade your loan and gain features that suit your strategy.
- Tap Your Equity: As your investment property grows in value, you may be able to borrow up to 80% of its current market worth. This can be utilized to renovate or purchase your next investment.
- Reduce Your Monthly Payments: Even a slight reduction in interest rates can lead to huge savings. It is also important to check if your bank is imposing loyalty tax, wherein the current customers pay more than the new customers.
Major Benefits of Investment Property Refinance
- Depending upon strategy, switch from fixed to variable (or vice versa)
- Reduce repayments and save thousands over the loan term
- You can access the equity in your property to help fund other financial goals, such as renovations, investing, or starting a new project.
- Claim tax deductions not available on owner-occupied homes, such as:
- Loan application fees
- Mortgage broker fees
- Property valuation costs
- Title search fees
- Lenders mortgage insurance (if applicable)
- Break fees on fixed-rate loans
- Legal and discharge fees
Note: Not all deductions apply to every borrower. Always check with your accountant.
Costs to Consider
While refinancing can offer great benefits, there are some costs involved:
- Application fees and settlement charges
- Mortgage registration and discharge fees
- Exit fees or break fees (from your current lender)
- Time and effort involved in gathering documents and processing paperwork
It is essential to compare all these costs to the long-term savings which you could gain from refinancing.
How Long Does Refinancing Take?
Usually, refinancing an investment property takes anywhere between 3 days to 6 weeks. The exact time depends on a number of factors like the lender, your documents, and the complexity of your loan.
If you are looking for a faster process, consult us today and get assured of effective service through an experienced set of mortgage brokers.
Final Thoughts on Investment Property Refinance
Investment property refinance can unlock your savings, improve your loan terms and fund your next big move. But don’t be tempted by sensational deals and always keep your future financial goals in mind.
Ready to refinance your investment property? Contact Loan Junction today and take control of your financial future.
Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute tax or financial advice, whether general or personal nor is it intended to imply any recommendation or opinion about a financial product. It does not take into consideration your personal situation and may not be relevant to circumstances. Before taking any action, consider your own particular circumstances and seek professional advice. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced or republished without prior written consent.