When you're working FIFO in Western Australia and looking to invest in real estate, understanding variable rate investment loan features can make a real difference to your property investment strategy. Variable interest rates move up and down with market conditions, and while this might sound unpredictable, these loans come with features that can work well for your investment goals.
How Variable Rate Investment Loans Work
A variable interest rate means your Investment Loan Interest Rate can change over time. When the Reserve Bank of Australia adjusts the cash rate, lenders typically pass these changes on to borrowers. This means your rental property loan repayments can go up or down depending on market conditions.
For FIFO workers buying an investment property, this flexibility can be advantageous. When rates drop, you'll pay less interest, which improves your cash flow and rental yield calculations. The property market has seen various rate cycles, and many property investors have benefited from periods of lower rates.
Key Features of Variable Investment Loans
Variable rate loans typically offer more features than their fixed-rate counterparts. Here are the main ones to consider:
• Offset accounts - Link a savings account to your loan to reduce the interest you pay
• Redraw facilities - Access extra repayments you've made when you need cash
• Interest-only options - Pay only interest for a set period, which can help with negative gearing strategies
• Extra repayment flexibility - Make additional payments without penalties
• Loan portability - Transfer your loan to a different property if needed
Ready to get started?
Book a chat with a Finance & Mortgage Broker at FIFO Home Loans today.
Interest Rate Discounts and LVR Considerations
Many lenders offer interest rate discounts on variable investment loans, particularly if you have a strong borrowing capacity or are building an investment property portfolio. The loan to value ratio (LVR) plays a significant role here. If you're buying a town house, apartment, or stand alone dwelling with a deposit of 20% or more, you'll typically avoid lenders mortgage insurance (LMI) and may qualify for better rates.
For your first investment property, understanding how LVR affects your loan amount and interest rate is crucial. A lower LVR often means access to more competitive rates and loan features.
Calculating Investment Loan Repayments
With variable rates, calculating investment loan repayments requires considering potential rate movements. Most lenders provide calculators that show how repayments change with different interest rates. This helps you plan for various scenarios and understand how rate changes might affect your rental yield.
When applying for an investment loan, lenders will assess your borrowing capacity based on the rental income potential of your investment property, plus your FIFO income. They'll review your bank statements and consider how rate rises might affect your ability to service the loan.
The Application Process for FIFO Workers
The investment loan application process involves researching properties and understanding different investment loan options from banks and lenders across Australia. As a FIFO worker, you'll need to demonstrate stable income and may benefit from working with brokers who understand the mining industry.
Your application will need to show:
- Proof of FIFO employment and income
- Details of the investment property you're purchasing
- Your property investment strategy
- Bank statements and financial position
- Evidence you've researched the property market
Many lenders now offer a streamlined application process for investment loans, particularly for borrowers with strong financial positions. Some FIFO workers find they can access investment loans for FIFO workers with favourable terms due to their typically higher incomes.
Building Your Investment Property Portfolio
Variable rate loans can be particularly useful when expanding your property portfolio. The flexibility these loans offer means you can take advantage of opportunities as they arise. If you're considering buying your first investment property, starting with a variable rate loan gives you options to refinance or adjust your strategy as your portfolio grows.
Some FIFO workers also explore debt recycling strategies, where the flexible features of variable rate investment loans can be particularly valuable.
Managing Interest Rate Risk
While variable rates can go down, they can also rise. Having a buffer in your budget for potential rate increases is important. Many investors factor in rate rises of 1-2% above current levels when planning their investment strategy.
Consider whether interest-only loans for FIFO workers might suit your situation, as these can provide lower initial repayments while you establish your investment.
Variable rate investment loans offer flexibility that many FIFO property investors value. The key is understanding how the features work with your investment goals and ensuring you're prepared for rate movements. Whether you're looking at your first rental property or adding to an existing portfolio, these loan features can support your property investment journey.
Call one of our team or book an appointment at a time that works for you to discuss how variable rate investment loan features could work for your property investment strategy.
