When buying an investment property in Frankston or surrounding areas, understanding the fees and costs associated with variable rate investment loans is crucial for your property investment strategy. Variable interest rate loans offer flexibility but come with specific fee structures that can impact your overall investment returns.
Understanding Variable Rate Investment Loans
A variable interest rate investment loan means your interest rate can fluctuate based on market conditions and lender decisions. Unlike fixed interest rate options, variable rates can decrease or increase throughout your loan term, affecting your calculating investment loan repayments.
When you access investment loan options from banks and lenders across Australia, you'll discover that variable rate loans often provide features such as:
• Offset accounts to reduce interest charges
• Redraw facilities for accessing additional payments
• Interest rate discounts for larger loan amounts
• Flexible repayment options
Key Fees Associated with Variable Rate Investment Loans
Application Fees
Most lenders charge an application fee when applying for an investment loan. This fee covers the cost of processing your investment loan application and typically ranges from $300 to $800. Some lenders may waive this fee as part of promotional offers or for borrowers with strong borrowing capacity.
Ongoing Monthly Fees
Variable rate investment loans often include monthly service fees ranging from $10 to $30. These fees cover account maintenance and administration costs throughout your loan term.
Lenders Mortgage Insurance (LMI)
When your loan to value ratio (LVR) exceeds 80% of the property value, you'll typically need to pay lenders mortgage insurance (LMI). For investment properties, LMI calculations differ from owner-occupied homes and can cost several thousand dollars depending on your loan amount and LVR.
Valuation Fees
Lenders require professional property valuations to determine the loan amount they'll approve. Valuation fees typically range from $300 to $600, depending on property type. Whether you're purchasing a town house, apartment, or stand alone dwelling, this fee applies to most rental property loan applications.
Legal and Settlement Fees
These fees cover legal documentation and settlement processes, typically ranging from $800 to $1,500. Your mortgage broker in Frankston can help explain these costs during the application process.
Additional Investment Property Costs
Stamp Duty
Stamp duty represents a significant cost when buying a rental property. In Victoria, stamp duty rates for investment properties are higher than owner-occupied purchases, with additional foreign buyer duties applying to overseas investors.
Property Management Costs
While not directly related to your loan, property management fees typically range from 6% to 10% of rental income. These costs affect your rental yield calculations and overall investment returns.
Insurance Requirements
Lenders require comprehensive property insurance for investment properties. Building insurance is mandatory, while landlord insurance provides additional protection against rental-related risks.
Maximising Your Investment Loan Benefits
To optimise your investment loan experience:
- Research property locations thoroughly to understand potential rental yields
- Compare investment loan options from multiple lenders
- Consider your first investment property as part of a broader investment property portfolio strategy
- Understand negative gearing implications for your tax situation
- Review property investment loan features regularly
The Application Process
When you begin your investment loan application, lenders will require:
• Recent bank statements showing your financial position
• Income documentation including pay slips and tax returns
• Property details and purchase contracts
• Existing debt information
• Deposit confirmation
The streamlined application process varies between lenders, with some offering faster approval times for experienced investors or those with strong financial positions.
Interest Rate Considerations
Your Investment Loan Interest Rate depends on several factors including your LVR, borrowing capacity, and the lender's assessment of your application. Variable rates allow you to benefit from rate decreases but also expose you to potential increases.
Property market conditions can influence lender policies and available interest rate discounts. Working with experienced mortgage brokers provides access to current market information and lender preferences.
Making Informed Investment Decisions
Successful property investment requires understanding all associated costs, not just the loan interest rate. Consider how fees and costs impact your overall investment returns and factor these into your property investment strategy.
Whether you're investing in real estate for the first time or expanding your existing portfolio, understanding variable rate loan costs helps you make informed financial decisions.
For personalised advice about investment loans and accessing competitive variable rate options from lenders across Australia, speak with our experienced team. We can help you understand the complete cost structure and find loan options suited to your investment goals.
Call one of our team or book an appointment at a time that works for you to discuss your investment property financing needs.
