Interest in Advance – is this the right strategy for you?

June 05, 2015
Ali Batten

Are you a property investor who needs help budgeting over the coming year?

Perhaps you are self-employed investor and aren’t expecting to earn as much next year as you did this year?
If this is the case, you may find that an Interest in Advance home loan feature is just the ticket.

Interest in Advance loans enable customers to pre-pay interest 12 months in advance in order to gain tax benefits for a specific taxation period.
With Interest in Advance loans you will receive tax breaks on your interest sooner rather than later. You do not have to wait for the next financial year to claim the interest you paid as a tax deduction because you paid it upfront in the current financial year.

This type of product is aimed predominately at property investors to maximise their tax benefits, but it can also help with budgeting and cash flow, in case you don’t earn as much as planned in the following financial year.
Most Interest in Advance loans are only available on interest only Fixed Rate Investment Home Loans as it is easier for lenders to determine your projected interest costs.

Furthermore, interest in advance is only available for a certain number of years, with the majority of lenders only offering this home loan feature on shorter fixed rate periods, including 1,2,3,4 and 5 years.

Often lenders will not offer an Interest in Advance option on fixed rate investment home loans with fixed rate periods of 7, 10 and 15 years.
In addition to offering extra tax incentives and helping investors with their budgeting and cash-flow management, some Interest in Advance loans come with an interest rate discount.

Some lenders, such as Westpac, will trim up to 20 basis points off your fixed interest rate for paying your interest upfront. Of course, just because certain lenders may offer additional home loan discounts to those who utilise the Interest in Advance home loan feature, doesn’t meant to say that particular lender is offering the best or cheapest product overall.

At Mortgage Choice in Newtown, we can help you to determine whether or not Interest in Advance loans are right for you and your investment strategy. And, through our in-house financial adviser, we can also help you to identify what the right investment strategy is for you and your needs. 

Before making any financial and property investment decisions, it is worth seeking appropriate, professional advice through an adviser. They can work with you to establish your goals and then help put you on the right financial path.

To speak with a financial adviser or find out more about Interest in Advance loans, give us a call today on 02 9517 1818.

Posted in: Home loans

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