The Reserve Bank is keeping interest rates on hold meaning we are enjoying some of the lowest interest rates in history right now. This is great news for property investors because it means it costs you far less to hold an investment property now than it has in the past. For those investing and looking for stability in cash flow you have the option to consider variable or fixed interest rates.
In today’s market how does this compare?
If you were looking to purchase an investment property for $430,000 and borrow the full amount at a variable interest rate of 5% and let’s also assume you were on an income of $80,000 a year, once we account for costs such as interest rates, tax deductions and add in the rent you receive, it will only cost you approximately $55 per week.
For those investors who want stability in their cash flow you have the option to consider fixed interest rates. 5 year home loan fixed rates are averaging 5.6%. When comparing this with a variable rate of 5% your holding costs would increase by $32 per week. With this slight increase you will have security and peace of mind knowing that your repayments are not going to change or increase for 5 years.
If you would like to know more about this topic especially in regards to helping you understand the difference between variable or fixed interest rates and the affect it could have on your investment property cash flow please contact firstname.lastname@example.org