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What to know before refinancing your investment property loan
If you’re currently not happy with your interest rate it could be worth refinancing and getting a better deal.

If you’re currently not happy with your interest rate it could be worth refinancing and getting a better deal.

However, refinancing an investment property loan is a little bit different from refinancing an owner-occupier loan. Here are five things you should know before securing a better deal.

1. The cost of refinancing
Even though refinancing to a better rate can save you money down the track, it will initially cost you a bit of money. There are several costs which may be attached to refinancing, such as the application fee, discharge fee, settlement fee, mortgage registration fee, exit fee, and so on.

With that said, interest rates for investor loans are generally a bit higher than rates on owner-occupier loans so refinancing to a lower rate will generally work out to be cost-effective in the long run. You may even be able to recoup most, or all of these costs after a few months of repayments, or within the first few years.

2. Tax deductions
One of the perks of being a property investor is the number of tax deductions you may be able to take advantage of. If you’re refinancing an investment loan, did you know that you might be able to claim a tax deduction for the borrowing costs and exit fees? There are some cases where this can apply which is why it's recommended to speak with your tax adviser first.

3. Your loan to value ratio (LVR)
When you’re refinancing, the higher your loan to value ratio (LVR) the lower your equity, and the higher the risk you represent to the lender. If you have a high LVR, the lender may charge you a higher interest rate to offset this risk. Investment loans generally have stricter LVR requirements and many lenders won’t even allow you to refinance unless your LVR is at least 75% or below.

4. Credit rating
Your credit score plays a big role in determining what interest rate you’ll pay on your loan - the higher your credit rating is, the less risky you are in the eyes of the lender. For investors, having a good credit score is especially important as there are tougher lending restrictions on investment loans.

Refinancing represents an application for credit, which will appear on your credit report and can influence your credit score. If you refinance too often, lenders may be wary about allowing you to refinance.

5. Proof of income
When refinancing a mortgage, investors are scrutinised more than owner-occupiers. Investors need to provide more documentation of proof of income, including tax returns and salary slips, rental income received from the property, and so on. In cases where the property has been vacant for some time, or where rental income has been intermittent, some lenders may not consider the rent to be part of your income at all.

How do cash rate increases impact your investment loan?

Investment home loans are a popular way for people to invest in property, providing an opportunity to earn income through rental yields and capital growth.

Promoted by loans.com.au

Investment home loans are a popular way for people to invest in property, providing an opportunity to earn income through rental yields and capital growth. However, like all financial products, investment home loans are influenced by various factors, including the cash rate set by the Reserve Bank of Australia (RBA). In this article, we will explore how cash rate increases can impact your investment home loan.

The cash rate is the interest rate that banks use to borrow or lend money from the Reserve Bank of Australia. When the RBA increases the cash rate, banks and other lenders will generally increase their interest rates on loans, including investment home loans. This means that if you have an investment home loan, your repayments will increase, reducing your cash flow and potentially impacting your ability to maintain your investment property.

A cash rate increase can also impact the value of your investment property. When interest rates increase, the cost of borrowing money becomes more expensive, which can lead to a decrease in demand for property. This can result in lower property prices and potentially impact your rental income, as fewer people may be willing to pay high rental rates for a property.

Investors with variable interest rate loans will be the most impacted by cash rate increases. As the name suggests, the interest rate on these loans can change depending on market conditions, including the cash rate set by the RBA. If the cash rate increases, the interest rate on your variable interest rate loan is likely to also increase, which can have a significant impact on your repayments.

If you have a fixed-rate investment home loan, you will generally be shielded from immediate interest rate increases. Fixed-rate loans have a set interest rate for a period, typically ranging from one to five years, providing certainty and stability in repayments during that period. However, once the fixed-rate period ends, the interest rate on your loan will switch to a variable rate, which can be influenced by the cash rate.

There are a few strategies you can use to mitigate the impact of cash rate increases on your investment home loan. One option is to negotiate a lower interest rate with your lender. By doing so, you may be able to reduce your monthly repayments and make your investment property more affordable.

Another option is to consider refinancing your investment home loan. Refinancing involves replacing your current loan with a new one from a different lender, potentially with a lower interest rate or better loan features. This can help you reduce your repayments and make your investment property more affordable.

The importance of loan calculators when the RBA increases rates
When the RBA increases the cash rate, it can be helpful to use a loan calculator to determine how the increase will impact your mortgage repayments. A loan calculator can help you estimate the impact of different interest rates on your mortgage and allow you to plan for potential changes in your repayments.

If you are ready to refinance your investment loan with loans.com.au, call us to chat with a friendly lending specialist, chat with us online or check out our competitive low-interest investment home loans.

Findings of short-term rental report "entirely unsurprising"

A new report has concluded Queensland's rental crisis was not caused by holiday homes, which the state's peak real estate body says reiterates what they already knew.

A lack of housing supply, not short-term letting, is to blame for Queensland's rental crisis according to the findings of a new report.

The Queensland state government commissioned the University of Queensland to assess the impacts of short term rentals like Airbnb and Stayz on the state's tight rental market after the Brisbane City Council announced it would be cracking down on short-term rental owners by hiking rates.

The report concluded that short-term rentals have a limited impact on rental affordability, and that dwelling stocks were a significant contributor to explaining rental price increases.

Deputy Premier Steven Miles said the review revealed that short-term rentals are most prevalent in high tourism coastal areas and have limited impact on wider rental affordability.

“The review found no clear alignment between the suburbs with the highest rent increases and the percentage of dwellings devoted to short-term rental. Instead, dwelling stocks emerged as the significant contributor to explaining rental prices," Mr Miles said.

Real Estate Institute of Queensland (REIQ) CEO Antonia Mercorella said the findings of the report are "entirely unsurprising".

"How many different times do we need to end up coming to the same conclusion that insufficient rental supply is the root of the issue before it hits home?” Ms Mercorella said.

“This report cements the fact there is no correlation between the prevalence of short-term rentals and nearby long-term rental affordability, and our hope is that it can finally stop distracting government from where their real focus needs to be - addressing supply.”

Read more: Is it ethical to invest in Airbnb's during a rental crisis?

The report found that there were 19,773 active short-term rentals in Queensland in the first quarter of 2023. Of those, 11,193 were used on a permanent basis, with two-thirds of these rentals within the state's south-east.

The report said the Queensland Government would now consider implementing a short-term rental registration system.

“A registration system could serve as a tool to support local governments in monitoring short term rental activity and could provide invaluable insights into its impact on our housing market over time, to inform evidence-based regulation," Mr Miles said.

Ms Mercorella said the short-term rental register contradicts the report's acknowledgement of the limited impact of short-term rentals on the market.

“The proposed short-term rental register smacks of using any excuse for the government to collect data on property investors for the purposes of ultimately penalising them through greater regulation and higher rates,” Ms Mercorella said.

“This crisis wasn’t caused by people investing in Queensland property or having holiday homes in our state.

“Planning pitfalls and various obstacles have been holding back our state’s housing supply and pathways to home ownership – and this is absolutely where the government’s focus needs to be to get to the crux of this issue.”