How to reduce your investment property interest rate?

Investing in property is a great way to build wealth, but high investment property interest rates can eat into your profits. Understanding how to reduce these rates can significantly improve your return on investment. This guide will provide you with practical tips to lower your investment property interest rates in Australia and highlight how a mortgage broker can assist you in this process.

Understanding Investment Property Interest Rates

Investment property interest rates are the rates charged by lenders on loans used to purchase investment properties. These rates are typically higher than those for owner-occupied properties due to the perceived higher risk. However, there are several strategies you can employ to reduce these rates and save money over the life of your loan.

Tips to Reduce Your Investment Property Interest Rates

1. Improve Your Credit Score

Lenders use your credit score to judge how trustworthy you are as a borrower. Having a better credit score can help you get a better deal on an interest rate. Ensure you pay your bills on time, reduce outstanding debts, and regularly check your credit report for errors.

2. Increase Your Deposit

A larger deposit reduces the lender's risk, which can translate into a lower interest rate. Aim to save at least 20% of the property's purchase price. Not only can this lower your interest rate, but it can also help you avoid paying lenders mortgage insurance (LMI).

3. Choose a Loan with a Lower Loan-to-Value Ratio (LVR)

The loan-to-value ratio (LVR) is the percentage of the property value that you are borrowing. A lower LVR indicates a lower risk for the lender, which can result in a reduced interest rate. For example, an LVR of 80% means you are borrowing 80% of the property’s value and providing a 20% deposit.

4. Opt for a Fixed or Variable Rate Loan

Fixed-rate loans offer stability with a set interest rate for a specific period, whereas variable-rate loans fluctuate with market conditions. Depending on market trends, one option may offer a better rate than the other. Consult with your mortgage broker to determine which option suits your financial situation best.

5. Refinance Your Loan

Refinancing involves switching your existing loan to a new one with better terms and lower interest rates. Monitor the market for better deals and consider refinancing if you find a significantly lower rate. Ensure you factor in any refinancing costs to determine if the switch is financially beneficial.

6. Negotiate with Your Lender

Lenders are often willing to negotiate, especially if you have been a reliable borrower. Highlight your good repayment history and any improvements in your financial situation. Seeking a better rate is always worthwhile.

7. Consider an Offset Account

Your mortgage is connected to an offset account, which is a savings or transaction account. The balance in this account offsets the amount owed on your loan, reducing the interest payable. Using an offset account effectively can reduce your interest rate and shorten the loan term.

How a Mortgage Broker Can Help

Navigating the complexities of investment property interest rates can be challenging, but a mortgage broker can simplify the process. Here’s how:

1. Expert Advice

Mortgage brokers specialize in the housing loan market. They stay updated on the latest trends and policies, providing you with expert advice on how to secure the lowest interest rates.

2. Access to Multiple Lenders

There is a large network of lenders and loan products available to mortgage brokers. They can compare various options and negotiate on your behalf to find the most competitive interest rates.

3. Tailored Solutions

Every investor’s situation is unique. A mortgage broker can assess your financial circumstances and investment goals to recommend the most suitable loan products that offer favorable interest rates.

4. Streamlined Application Process

Applying for a loan involves extensive paperwork and can be time-consuming. A mortgage broker can handle the application process, ensuring all documentation is correctly submitted and increasing the likelihood of approval at a lower interest rate.

5. Ongoing Support

A good mortgage broker provides ongoing support even after your loan is settled. They can help you monitor your loan and inform you of any opportunities to refinance at a lower rate in the future.

Steps to Get a Lower Interest Rate

1. Assess Your Financial Situation

Evaluate your income, expenses, and existing debts. This will help you understand how much you can afford to borrow and repay.

2. Consult a Mortgage Broker

Engage a mortgage broker to discuss your investment goals and explore loan options. Their expertise will guide you in making informed decisions to secure the best interest rates.

3. Improve Your Financial Profile

Work on improving your credit score, saving for a larger deposit, and reducing your LVR. These steps will make you a more attractive borrower and help you secure lower interest rates.

4. Negotiate

Use your mortgage broker’s negotiation skills to secure the best possible rate. Don’t be afraid to ask your lender for a better deal.

Final thought

Lowering your investment property interest rates can greatly enhance your profitability and accelerate your wealth-building journey. By following the tips outlined in this guide and leveraging the expertise of a mortgage broker, you can secure the best possible rates and make the most of your property investment. Start taking steps today to optimize your investment strategy and achieve your financial goals. Loans and Mortgages are the best Mortgage broker firm in Australia specializing in approaching financial services. We offer our services in Hobart, Launceston, Burnie, Devonport, George Town, Penguin, Smithton and near by areas of Tasmania. Our services are also extended all over Australia. For more details call us on 0403 803 470.