Differences between top-up mortgages, personal loans and Futurerent

See how we compare with top-up mortgages and personal loans.

Futurerent gives property investors up to $100,000 of their rent in advance. As Futurerent is not a credit product, it is not directly comparable to a traditional loan. However, to help our clients make the right financial decision for them, we have put together a list of the key differences between top-up mortgages, personal loans and Futurerent. Before making any financial decisions, you should seek professional financial advice specific to your own circumstances.

1. Upfront costs

  1. Top-up mortgages - There are multiple upfront fees involved in the refinancing process, including break costs (if on a fixed rate), establishment fees, discharge fees, valuation fees, settlement fees, and several other government charges. You may sometimes receive promotional 'cashback' offers from your new lender, but you will need to consider if any potential cashback outweighs the upfront cost of topping up.
  2. Personal loans - Lenders often charge an application fee upfront, which can either be a fixed amount or a percentage of the total loan amount.
  3. Futurerent - There are no upfront costs involved.

2. Ongoing costs

  • Top-up mortgages & personal loans - Interest payments are the most significant ongoing cost for topping up and personal loans. With top-up mortgages, the extra debt is rolled into your existing mortgage and is repaid over the course of your loan, with interest for the top-up compounding over this period. Generally, there are two scenarios:
    • - If you only make the minimum repayments each month, you will be charged interest for the top-up or personal loan over the entire remaining loan term.
    • - If you make extra repayments (provided your mortgage/personal loan product allows you to do so without charge or restriction), you may be able to pay off the top-up or personal loan sooner and pay less in interest.
  • For top-up mortgages, keep in mind that interest rates are likely to change over the life of your loan term and this will impact the cost of topping up for you. Other common ongoing costs of topping up and personal loans include monthly and/or annual administration fees.
  • Futurerent - There is a fixed cost of 6% on the amount advanced for each year of the expected term; this is calculated at commencement of your agreement. For example, if you get $100,000 rent advanced and choose to pay it back over 3 years, the cost is fixed at $18,000 ($100,000 x 6% x 3 years). This means that if for any reason it takes longer to be repaid, because for example the property it vacant for a period of time, it doesn't cost you any extra and it simply takes longer to repay the fixed amount of rent Futurerent is due. This fixed cost can be paid off earlier with no penalty, though the amount payable remains the same. It is typically paid from your ongoing rent as equal monthly instalments.

3. Penalty charges

  • Top-up mortgages & personal loans - A break cost is applicable when you close a fixed-rate mortgage or fixed-rate personal loan early, though it is more substantial for mortgages. It is also common for lenders to charge penalties for early repayments and missed repayments.
  • Futurerent - There are no early repayment fees or late payment fees. While not a penalty per se, additional costs may apply in some limited circumstances. Futurerent may charge a 'rectification cost' if an approved applicant's investment property does not meet the minimum rental standards required under residential tenancy law. If the approved applicant does not bring the property up to minimum standards required under residential tenancy law, Futurerent has the right to step in and perform the work to comply with legal requirements. Such 'rectification costs' incurred by Futurerent would be added to the balance.

4. Length of terms

  • Top-up mortgages - By default, the term of your top-up mortgage is your remaining loan term on your existing mortgage. If you can make extra repayments without charge or restriction and you choose to do so, the length of your loan term may be reduced. However, note that this is not the default scenario, and you will need to make consistent extra repayments to see a significant difference to your loan term.
  • Personal loans - Loan terms are typically 1-7 years. Like top-up mortgages, this can be reduced by making extra repayments, though this may incur a fee.
  • Futurerent - You can select a term between 1.5, 2 or 3 years. If the property becomes vacant, or the rental income is reduced such that you need more time to pay Futurerent back, your term can be extended at no extra charge.

5. Rental income assignment

  • Top-up mortgages & personal loans - Aside from potentially using your rental income to help make repayments, your rental income is not affected.
  • Futurerent - Futurerent collects a fixed amount of rent from your investment property during the term and you will still receive part of this to help you cover the property's expenses. The proportion you receive will depend on how much rent in advance you get and how long your term is, for example:
    • - if you access 1 year's rent in advance on a 3-year term, you will get 61% of the rent each month during this period.
    • - if you access 1 year's rent in advance on a 1.5-year term, you will get 27% of the rent each month during this period.

How to contact us

For further information or enquiries, please email us at hello@futurerent.com.au.