Investment Home Loans 101
So, lets look at loan structures. Loans can be: Standard Amortising; Line of Credit (Equity) Amortising Equity; or Standard Interest Only
The traditional principal and interest loan that you will find at most banks (for buying the property and nothing but the property), is known as a Standard Amortising Loan.
More and more borrowers are taking advantage of the equity in their property by using it as a security to borrow for other purposes. Loans that allow you to use a mortgage for purposes other than investing in property fall into the "Line of Credit" category. These loans don't have a strict repayment schedule therefore, work best for borrowers who have plenty of self discipline.
Amortising Equity Loans let you borrow against the equity you have built up against your home. However, each time you change the loan amount, your repayment schedule is reset. You pay principal and interest repayments on the basis of your specified terms. These loans are good for borrowers who have built up equity in their home but like (or need) the repayment discipline that an amortising loan provides.
If you don't need to build up equity in a property, you may choose to use an interest only loan. Investors typically use interest only loans to maximize tax deductibility over the life of the loan.