Why take out a Split Home Loan?
A split home loan is used by property investors to spread the risk of their investment and to gain the benefits of floating and fixed rates of interest. If you have part of your loan in a floating interest rate it enables you to make lump sum payments. You can also have your loan spread over a short term interest rate and the rest over a longer fixed term when the market is good and interest rates are favorable to you.
Revolving credit allows you to combine your home loan with your everyday banking with everything in one account. You pay your salary into your account and this reduces what you owe on your loan. It is a great product for investors that want to use the equity from their property and put this towards improvements as well as other property related expenses. There are no set repayments on a revolving credit loan and your account balance must stay within the set parameters agreed when taking out the loan deal.
Benefits of an Offset Loan
An offset loan gives you the choice to offset your balance of your savings account against that of your floating home loan. You only pay the interest on the difference and this could reduce the amount of interest you have to pay on your home loan and save you thousands as well as cutting years off the length of the loan.
Some of the features of this type of account are that you make everyday transactions as usual but the more you pay into the account and the longer those funds stay there the less interest you have to pay on your investment property loan.
What is the Difference between an Offset Loan and Revolving Credit?
The benefits to both are very similar, the major difference being that with the offset loan you have separate accounts for your loan, savings and everyday transactions although they can be linked together to reduce your interest repayments. With a revolving credit loan your loan and everyday transactions are combined together into one account. Deciding which one is the best option for you comes down to whether you prefer all your financial options together in one account or into separate accounts. Talking to your mortgage broker or financial advisor can help you to discover which one of these is the best option.
When taking out a rental property loan it is important to get the best financial advice from your financial advisor or mortgage broker. He or she can give you the advice and answers to your questions directly while it is equally important to do your own research into what you need and not to borrow more than you can afford.