Interest rates play a significant role in whether or not property investment is fruitful. Loans with lower interest rates are cheaper, which means that you can take home more money at the end of every year. Low interest rates can also make the difference between an investment property being cash flow positive versus not. We have the lowest interest rates ever in Australia right now, so it’s time to invest!
How Low Are the Lowest Interest Rates Ever in Australia Right Now?
You can find home loans for primary residences for as little as 1.99% (promotional rates). The average mortgage rate isn’t much higher, though, at approximately 2.5%. To put that in perspective, five years ago you would have been looking at interest rates around 5.5%.
If you have a 25-year mortgage for $500,000 at 2.5%, your monthly payment will be $2,243, and you’ll wind up paying $172,925 in interest. If your rate were still 5.5%, you’d be looking at a whopping $421,131 in interest and a monthly payment of $3,070.
Yes, these are the lowest interest rates ever in Australia right now, so it is time to invest!
Why Invest Now?
With lower interest rates, you can pocket more money on any investment properties you buy. Consider the example before, where getting a $500,000 loan now would only be a monthly payment of $2,243. That figure means that you would only have to rent your investment property for $520 per week to break even in terms of the mortgage. In real life, of course, you’d also need to add in other expenses and depreciation.
By contrast, five years ago, you would have needed $710 ($190 more) per week to be able to cover the mortgage. That’s a substantial difference. If you can find people now to pay $600 per week, what was once a losing proposition (in terms of cash flow) is now a winning one!
If you already have an investment property, with interest rates being so low, you may wish to consider refinancing to take advantage of them. Or, if you’re not renting your property out but are using it as an investment second home, now might be a time to consider taking some money against the value of your home to fix it up.
Low Interest Rates Provide More Flexibility
We have the lowest interest rates ever in Australia right now, so it’s time to invest! Whether you’re looking at picking up a new investment property, fixing the ones you have, or refinancing your existing loan, now is a fantastic time to focus on your investments. Even with the current pandemic, there are plenty of investment opportunities available that have the potential to boost your net worth and increase your cash flow.
If you’re interested in any of these investment opportunities, please contact Buy Australian Property Investments. We would love to learn more about your situation and see how we can help you take advantage of these minimal interest rates.
One thing is for sure, though: these rates won’t last long! Therefore, please contact us today so we can get you into a better financial position before these rates go back up.