Strategies for a rising market (cont.)
One of the biggest changes in the investment lending landscape over the last 18 months has been the introduction of Investment Loans offering a “Walk-Away” feature.
As the name suggests, 100% Investment Loans provide investors with 100% gearing and are attractive to investors who want to gain leverage to the investment markets with no capital outlay. Investors need only fund the 7% – 9% pa which, in some cases, can be capitalised onto the loan. The investment is then used to fund a capital protected investment which ensures that the loan is paid off at maturity.
The flexibility of ‘Walk-Away’ feature should the investment fall in value is extremely valuable in volatile markets, especially when your investment has lost money. With the ‘Walk-Away’ feature, you are not obligated to fund the interest costs for years in to the future which allows you the opportunity to reset into a new product and benefit from an increase in markets from a lower level.
Investors familiar with SMSF lending rules will also be aware that SMSF gearing strategies revolve around whether or not a loan is limited recourse. ie SMSF’s cannot be at risk for more than their initial investment . Since Investment Loans with a ‘Walk Away’ feature no longer have the risk of ongoing interest costs, these products can typically be considered to be suitable for SMSFs.
Our capital protected comparison tables are regularly updated and highlight current offers available to investors. www.fundsfocus.com.au/latestoffers/