Tradies Finance

WONDERING how an investment property mortgage differs from a home mortgage? 

While the types of loans are similar, there are significant differences in how tax is treated with investment property mortgages. 

These often work to your advantage so make sure you contact the experts at Tradies Finance to find out how.

Your strategy determines the best loan for your needs

The key to determining which loan is best for your investment comes down to your investment strategy. As with any large financial decision, it’s important to seek advice from a  professional before entering into any property investment. There are plenty of people in the financial and mortgage industry who can help with this.

Build wealth through real estate

1. Capital gain

Relying on the increase in value of the property to be more than the initial price of the property plus your repayments, plus once-off costs like buying and selling fees. For example, if you purchase for $200,000, and sell for $300,000 and your repayments and additional costs were $60,000 the gross capital gain is $40,000.

2. Building equity

Relying on an increase in value of the property and bringing down the loan. For example, if you purchase for $200,000, and your loan is $150,000 you have $50,000 equity. A few years later if the property is valued at $225,000 and you have $100,000 remaining on the loan, you have $125,000 equity, plus you benefit from any rental return.

3 questions to help you choose your investment loan

There is a lot to consider when investing. Use these top three questions to help you set your financial goals and investment strategy – and find out where you may need advice.

  • Are you looking at a long or short term gain?
  • Do you want to take a passive (income) or aggressive (wealth building) approach? For example, are you looking to own a few properties where you can live comfortably off the rental income, or are you looking to build a portfolio of properties which you can sell, cash up and move to the south of France?
  • Will you structure your repayments to pay down the loan as quickly as possible or structure them in order to obtain a greater tax benefit?

There’s plenty of information available about investment property mortgages and investing in property. Read our handy Guide to Investment Loan Types and then devise a plan with your financial advisor or accountant, or determine a strategy yourself.