Investors FAQ

What is negative gearing?

When the cost of owning your investment property exceeds the income it is earning you can negatively gear, the shortfall and offset against other taxable income. Your financial adviser/registered tax agent can explain how it works in detail.

How do I borrow money against an existing property?

Provided you have equity in your existing property you can access extra money provided you meet the lenders credit criteria.

What's the difference between Principal & Interest and Interest Only repayments?

Principal and Interest is when you pay a portion of the balance in addition to the interest charged over an agreed period. This is to ensure the loan is paid back over the term of the mortgage. Loan repayments will include part of the loan and part of the interest on the loan.

Interest Only is when you're paying the interest of the balance with no principal over an agreed period. The key is to remember that interest payments on investment loans may be 100% tax deductible whilst the principal payments on investment loans are generally not tax deductible. Unless your specific financial strategy has a different objective, this is a key point to keep in mind. At the end of the loan term your balance will be the same as you first borrowed.

What is an interest in advance loan?

A fixed rate interest in advance mortgage is where you pay 1 year of interest in advance as one lump sum payment.

What is the difference between offset and redraw?

Redraw is when you make additional payments above the minimum amount into your mortgage in order to reduce the interest charges. If the lender allows, these additional payments can be accessed, or drawn on at any time. However this will impact the balance of the mortgage and interest payable. Offset is when you hold these additional payments in a separate linked transaction account - you aren't reducing the loan balance but you're still getting interest reductions through the offset.

What is a line of credit loan?

It is a flexible loan allowing you to draw down and repay smaller and larger sums at any time up to the approved limit. These loans have no agreed term and repayments are interest only based on the amount you have drawn down at the time.

If you want more information speak to your financial adviser/tax adviser/registered tax agent.