Contributory mortgages fill the income gap for investors

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With the Reserve Bank of Australia dropping the official interest rate to an all-time low of 1.5 per cent, investors will need to up their game in hunting for other income sources.

According to Australian Unity Investments head of mortgages Roy Prasad, investors would need to invest four times as much in a term deposit in order to earn the same amount of interest that they did before the global financial crisis. This is despite the fact that Australia's four major banks decided to favour savers over borrowers by increasing the interest rate on their term deposits.

Prasad recommends tapping the benefits of a contributory mortgage, which provides higher levels of income without the need to take additional risk. Under this structure, investors could select individual mortgage loans over commercial properties or create a portfolio of investments that suit their risk and return requirements.

Furthermore, investing in commercial mortgages can offer investors low volatility, higher returns compared to floating-rate investments, low levels of loss, and low correlation to other asset classes.

"Investors could also select the term of their investment, up to a maximum of two years, or roll over into a new contributory mortgage opportunity after the term expired," Prasad said.

Whether you are looking to buy your first home, move home, refinance, or invest in property, a mortgage broker can help. Access loans from all the major lenders, get help with paperwork – plus there is no charge for this service. Get help from a local mortgage broker

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