Understand What Negative Gearing is to Find the Best Investment Property Loan in Australia

January 9, 2021 By: Nfinity Financials0 comments

Hearing the word negative gearing is so common. This is a term that an investor uses and so does the media. But before we understand how this is connected to how we buy homes, lets understand what it exactly means. So, whether we are looking at best investment property loan or doing a comparison of home loan rates, understanding this concept is so important!

Basically, let’s just simply understand what this word ‘negative gearing’ means! On a simpler note, gearing is just borrowing money so that an asset can be purchased. And why this is a word so common in media, is because of the different government policies and regulations that surround gearing in Australia. So, this means that if Gearing affects the government policies, it also effects how the property markets appear to investors. To be honest, gearing affects the amount of housing which can be made available to the weekly rent in average.

Now this seems simple enough except for the fact that gearing itself is of different types and three types are important to you as a purchase intent holder for property.  To begin with gearing is positive, negative and neutral as well.

What is of importance at this moment, is to understand negative gearing and again whether you are looking for the best investment property loan or looking at a comparison of home loan rates, this knowledge about negative gearing is very important so that you make a right decision.

Now what exactly is negative gearing Investment Property Loan?

Now that you have decided to choose for yourself the best property loan, let’s see what negative gearing holds for you. Negative gearing basically means that the repayment of interest and expenses on the investments that you have made are basically more than the rental return on the property.

In short, you are making losses!
But there is good news too!

If you are in Australia, this negative gearing means that the tax bill of the property can be significantly reduced when the negative gearing is present. This is why negative gearing is still allowed and was available through the whole of this year.

Let’s read through this to understand this better!

Let’s say you borrowed money to invest into an asset which in this case is assumed to be a property. Naturally, you are expected to make an income from this investment that you have made. This is usually the rent right?. If you are negative geared, then the rental income that you are making is lesser than the expenses that you are bearing. But this also means that you can claim a deduction in terms of the full amount of the rental expenses when the tax return is being filed.

But don’t be disheartened because this negative gearing can benefit you too!
When you face a rental loss then this loss can be offset against other sources of income that you have including salaries! It means that you pay lesser taxes when you file the taxes.

Now let’s see why and how this negative gearing is connected with home loans and home loan rates. Does negative gearing and knowledge about negative gearing affect the comparison of loan rates?  Does negative gearing affect you decision for property loans?

Many investors buy properties which can be rented but many don’t. Many investors buy property so that it can be cashed on the capital growth which can be obtained in the long term. This means that many properties are bought with the expectation that its value would increase in the coming years and that is what needs to be capitalised.

There is where the connection between the property being bought and the negative gearing is made!

You buy a property to cash in the tax benefits, gain on the capital increment over the years and the best part is that you do all this on a home loan. This is why when you are looking at buying a property and taking a property loan, you need experts like us to make sure that you actually have a very good deal at hand. And this is exactly why you need to make a very good comparison of the home loan rates so that you actually benefit from the deal!

Fret not here! We are here to help you make this deal benefit you!
Contact us now and we will get the best Investment Property Loan and home loan rates for you!