How to Choose Between Fixed, Variable & Split Investment Loans

Understanding Investment Loan Interest Rate Options

When buying an investment property in Clayton, choosing the right interest rate structure is crucial for your property investment strategy. Whether you're purchasing a town house, apartment, or stand alone dwelling, understanding the differences between fixed, variable, and split loan options will help you make informed decisions about your investment loan application.

For property investors looking to access Investment Loan options from banks and lenders across Australia, the interest rate structure you choose can significantly impact your rental yield and overall returns. Let's explore each option to help you determine which suits your investment property portfolio goals.

Variable Interest Rate Investment Loans

A variable interest rate means your loan amount repayments will fluctuate based on market conditions and lender decisions. This option offers flexibility and potential benefits:

• Interest rate discounts may be available as lenders compete for business
• Repayments decrease when rates fall, improving your cash flow
• Additional repayment features often available without penalties
• Offset accounts and redraw facilities typically included

However, variable rates also present risks. When calculating investment loan repayments, consider that rates can increase, potentially affecting your borrowing capacity and investment returns. This uncertainty makes budgeting more challenging, particularly for first investment property buyers who may prefer predictable costs.

Fixed Interest Rate Investment Loans

Fixed rates provide certainty by locking in your Investment Loan Interest Rate for a predetermined period, typically one to five years. This structure offers several advantages:

• Predictable repayments assist with budgeting and cash flow planning
• Protection against interest rate rises during the fixed period
• Easier to calculate potential negative gearing benefits
• Suitable for investors who prefer stability in their property investment strategy

The main limitation is that you won't benefit if interest rates fall. Additionally, fixed rate loans often have fewer features and may include break costs if you want to refinance before the fixed period ends. When applying for a investment loan with a fixed rate, consider your long-term investment goals and market outlook.

Split Loan Options for Investment Properties

Split loans combine both fixed and variable components, allowing you to divide your loan amount between the two rate types. This approach provides:

• Partial protection against rate rises through the fixed portion
• Flexibility to benefit from rate falls on the variable component
• Access to variable loan features on part of your loan
• Opportunity to hedge your interest rate risk

For example, you might fix 60% of your rental property loan and keep 40% variable. This strategy can be particularly effective for investors with larger investment property portfolios who want to balance stability with flexibility.

Factors to Consider When Choosing

Several factors should influence your decision when researching property investment loan features:

Market Conditions: Consider current interest rate trends and economic forecasts. If rates are low and expected to rise, fixing might be advantageous. If rates are high and likely to fall, variable could be preferable.

Investment Goals: Your property investment strategy should align with your loan structure. Long-term investors might prefer fixed rates for budgeting certainty, while active investors may want variable loan flexibility.

Loan to Value Ratio (LVR): Higher LVR loans may require lenders mortgage insurance (LMI), affecting your overall costs. Some lenders offer different rate structures based on your LVR.

Property Type: Whether you're buying a rental property such as an apartment, town house, or stand alone dwelling may influence available investment loan options and rates from different lenders.

The Application Process Considerations

During the streamlined application process, lenders will assess your banks statements, borrowing capacity, and investment property details. The interest rate structure you choose can impact:

• Loan approval based on serviceability calculations
• Required documentation and assessment criteria
• Available loan features and flexibility
• Stamp duty and other property market costs in your financing structure

Working with experienced professionals familiar with Clayton's property market can help you access Investment Loan options from banks and lenders across Australia and choose the most suitable rate structure for your circumstances.

Making Your Decision

There's no one-size-fits-all solution when choosing between fixed, variable, or split investment loan options. Consider your risk tolerance, investment timeline, and financial circumstances. Many successful property investors use a combination of rate types across their portfolio to balance risk and opportunity.

For investors in Clayton looking to invest in real estate, understanding these options is essential for making informed decisions about your investment loan application and long-term property investment success.

Ready to explore your investment loan options? Our experienced team at Embark Financial can help you access Investment Loan options from banks and lenders across Australia, ensuring you choose the right interest rate structure for your investment property goals. Call one of our team or book an appointment at a time that works for you to discuss your specific requirements and find the most suitable financing solution for your Clayton investment property purchase.