Setting up the right structure for your investment property home loans is critical to maximising the benefit you can get out of the equity you hold in your home.If you are like most investors, you would not be able to make this decision unless you have acrued some equity in your home.
Establishing the right balance for your Investment Property Home Loans, will allow you to make decisions in the future about where and when you might add to your investments, wether that be in property, shares or some other form of investment.
There are lots of different opinions on what the perfect structure is for investment property home loans, and of course your particular situation will be different from the next person, so ultimately there is no real perfect one size fits all.
Having said that, I am in agreement with the majority, and have listed the basic outline below;
Home Loan to access equity in the family home; An L.O.C. or line of credit loans.
Investment Property Home Loans; Interest Only
I recommend that both loans be with the same bank for the first investment. Many well respected investors do not recommend this. It is their opinion that you should not put all of your eggs in the one basket, it is to risky.
Interestingly as a borrower, ie you are borowing money from the bank, you are not taking the risk, the bank is. If the bank does in fact go broke, the reality is that some other bank will take them over and your loan contract will simply transfer from one bank to another.
On the other hand if you are depositing money with a bank or fonancial institution you may want to consider spreading your risk.
The reason I recomend both investment property home loans should be with the one lender to start with, is simply that the approval process is much more complicated when there is more than one bnk involved.
Here is the critical thing particularly as we are setting up the loans with the same bank.
Your bank may want you to take security over both properties for both loans. This is called cross-collateral, and you don't want a bar of it. You can read an outstanding article on Investment Property Home Loans and the perils of cross collateralisation here
