In light of the recent interest rate cut to the lowest level in history, you might want to consider refinancing or pressing ahead with a new project using funding. Most property investors have common goals from leveraging funding and they are:
- Borrow the highest amount possible.
- Borrow at the lowest rate possible.
- Secure the lowest monthly loan payment.
- Fix the rate for the longest period possible.
- If refinancing the goal is to release equity AND reduce the monthly debt service charge.
It makes lots of sense if you can fix your rate for as long as possible. This is because of the certainty a fixed rate provides for years into the future so you can accurately forecast your profit and returns from your investment. 10 years or more is available from some lenders in the specialist property sector.
Interest rates are now at an historic low level. It therefore makes a great deal of sense to look at refinancing any property in portfolio to take advantage of the low rates and lock them in for as long as possible.
Some investors typically want an interest only loan because the payments are not loaded with an element of capital repayment and they will get capital increases from the property appreciation so just want the lowest monthly cost. However with borrowing so cheap some investors may want to look at a capital repayment option if the total monthly payment can be serviced by the net property income.
The new wave of challenger banks is having a significant impact on the banking and lending industry. By being agile and innovative with new lending products the challenger banks can out manoeuvre high street lenders and with no baggage from the 2009 financial crisis they can also offer very competitive rates.
There are investor mortgage products that offer the best of both worlds whereby the investor can take a 10 year / interest only / fixed rate deal and have the option to repay 10% of the capital in any 12 month period without penalty. There is therefore the option to pay down capital as and when surplus funds allow, without making a commitment to the lender to do no more than cover interest.
There has never been a better time for an investor to borrow money for property and achieve all the goals listed above. Release more funds – again at the lowest rates possible – and invest in more property – leveraging more cheap funds and being able scale investments and portfolios.