Home News Contributory mortgages fill the income gap for investors

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.

It can be confusing to know whether to get a variable rate or fixed rate mortgage, and what features are important. That's why it's important to not only check the right rates, but make sure that you're getting the right features in your home loan. Get help choosing the right home loan

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