In our investment property home loans guide:
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Easy Street - Street Smart Variable | |
---|---|
Variable interest rate | 5.79% p.a. |
Comparison rate^ | 5.84% p.a. |
Features |
|
Maximum loan to value ratio (LVR) | 95% |
Pacific Mortgage Group - Investment Variable Home Loan | |
Variable interest rate | 5.89% p.a. |
Comparison rate^ | 5.89% p.a. |
Features |
|
Maximum loan to value ratio (LVR) | 80% |
Hume Bank - liteBlue Investor Variable Rate | |
Variable interest rate | 5.89% p.a. |
Comparison rate^ | 5.90% p.a. |
Features |
|
Maximum loan to value ratio (LVR) | 95% |
Beyond Bank - Purple Basic Variable Investment Home Loan | |
Variable interest rate | 5.89% p.a. |
Comparison rate^ | 5.92% p.a. |
Features |
|
Maximum loan to value ratio (LVR) | 90% |
Bank Australia - Basic Home Loan | |
Variable interest rate | 5.89% p.a. |
Comparison rate^ | 5.94% p.a. |
Features |
|
Maximum loan to value ratio (LVR) | 60% |
Community First Bank - Basic Home Loan Investor | |
Variable interest rate | 5.89% p.a. |
Comparison rate^ | 5.94% p.a. |
Features |
|
Maximum loan to value ratio (LVR) | 95% |
Summerland Credit Union - Eco Home Loan | |
Variable interest rate | 5.89% p.a. |
Comparison rate^ | 5.94% p.a. |
Features |
|
Maximum loan to value ratio (LVR) | 60% |
HSBC - Home Value Loan | |
Variable interest rate | 5.94% p.a. |
Comparison rate^ | 5.94% p.a. |
Features |
|
Maximum loan to value ratio (LVR) | 60% |
BCU Bank - Basic Home Loan | |
Variable interest rate | 5.94% p.a. |
Comparison rate^ | 5.95% p.a. |
Features |
|
Maximum loan to value ratio (LVR) | 70% |
Unloan - Investment Home Loan | |
Variable interest rate | 6.04% p.a. |
Comparison rate^ | 5.95% p.a. |
Features |
|
Maximum loan to value ratio (LVR) | 80% |
Bank Australia - Basic Home Loan | |
Variable interest rate | 5.94% p.a. |
Comparison rate^ | 5.99% p.a. |
Features |
|
Maximum loan to value ratio (LVR) | 80% |
Police Credit Union - Better Home Loan Investmetn Special | |
Variable interest rate | 5.94% p.a. |
Comparison rate^ | 5.99% p.a. |
Features |
|
Maximum loan to value ratio (LVR) | 80% |
HSBC - Home Value Loan | |
Variable interest rate | 5.99% p.a. |
Comparison rate^ | 5.99% p.a. |
Features |
|
Maximum loan to value ratio (LVR) | 70% |
Qudos Bank - No Frills Home Loan | |
Variable interest rate | 5.99% p.a. |
Comparison rate^ | 5.99% p.a. |
Features |
|
Maximum loan to value ratio (LVR) | 70% |
Hume Bank - liteBlue Investor Variable Rate | |
Variable interest rate | 5.99% p.a. |
Comparison rate^ | 6.00% p.a. |
Features |
|
Maximum loan to value ratio (LVR) | 80% |
P&N Bank - Investor Basic Loan | |
Variable interest rate | 5.99% p.a. |
Comparison rate^ | 6.00% p.a. |
Features |
|
Maximum loan to value ratio (LVR) | 70% |
Greater Bank - Great Rate Home Loan | |
Variable interest rate | 5.99% p.a. |
Comparison rate^ | 6.01% p.a. |
Features |
|
Maximum loan to value ratio (LVR) | 80% |
ubank - Neat Home Loan | |
Variable interest rate | 5.99% p.a. |
Comparison rate^ | 6.01% p.a. |
Features |
|
Maximum loan to value ratio (LVR) | 60% |
Beyond Bank - Purple Basic Variable Investment Home Loan | |
Variable interest rate | 5.99% p.a. |
Comparison rate^ | 6.02% p.a. |
Features |
|
Maximum loan to value ratio (LVR) | 80% |
Newcastle Permanent - Real Deal Investment | |
Variable interest rate | 5.99%p.a. |
Comparison rate^ | 6.03% p.a. |
Features |
|
Maximum loan to value ratio (LVR) | 80% |
Summerland Credit Union - Eco Home Loan | |
Variable interest rate | 5.99%p.a. |
Comparison rate^ | 6.04% p.a. |
Features |
|
Maximum loan to value ratio (LVR) | 80% |
HSBC - Home Value Loan | |
Variable interest rate | 6.04% p.a. |
Comparison rate^ | 6.04% p.a. |
Features |
|
Maximum loan to value ratio (LVR) | 80% |
LCU - Property Investment Mortgage | |
Variable interest rate | 5.99% p.a. |
Comparison rate^ | 6.05% p.a. |
Features |
|
Maximum loan to value ratio (LVR) | 95% |
Tiimely Home - Investment Home Loan (formerly Tic:Toc) | |
Variable interest rate | 6.04% p.a. |
Comparison rate^ | 6.05% p.a. |
Features |
|
Maximum loan to value ratio (LVR) | 90% |
BCU Bank - Basic Home Loan | |
Variable interest rate | 6.04% p.a. |
Comparison rate^ | 6.05% p.a. |
Features |
|
Maximum loan to value ratio (LVR) | 95% |
People's Choice - Basic Home Loan Investor Special | |
Variable interest rate | 6.04% p.a. |
Comparison rate^ | 6.05% p.a. |
Features |
|
Maximum loan to value ratio (LVR) | 80% |
Bank of Sydney - BOS Basic Investment Home Loan | |
Variable interest rate | 5.99%p.a. |
Comparison rate^ | 6.05% p.a. |
Features |
|
Maximum loan to value ratio (LVR) | 60% |
Variable interest rate | Comparison rate^ | Features | Maximum loan to value ratio (LVR) | |
---|---|---|---|---|
Easy Street - Street Smart Variable | 5.79% p.a. | 5.84% p.a. |
| 95% |
Pacific Mortgage Group - Investment Variable Home Loan | 5.89% p.a. | 5.89% p.a. |
| 80% |
Hume Bank - liteBlue Investor Variable Rate | 5.89% p.a. | 5.90% p.a. |
| 95% |
Beyond Bank - Purple Basic Variable Investment Home Loan | 5.89% p.a. | 5.92% p.a. |
| 90% |
Bank Australia - Basic Home Loan | 5.89% p.a. | 5.94% p.a. |
| 60% |
Community First Bank - Basic Home Loan Investor | 5.89% p.a. | 5.94% p.a. |
| 95% |
Summerland Credit Union - Eco Home Loan | 5.89% p.a. | 5.94% p.a. |
| 60% |
HSBC - Home Value Loan | 5.94% p.a. | 5.94% p.a. |
| 60% |
BCU Bank - Basic Home Loan | 5.94% p.a. | 5.95% p.a. |
| 70% |
Unloan - Investment Home Loan | 6.04% p.a. | 5.95% p.a. |
| 80% |
Bank Australia - Basic Home Loan | 5.94% p.a. | 5.99% p.a. |
| 80% |
Police Credit Union - Better Home Loan Investmetn Special | 5.94% p.a. | 5.99% p.a. |
| 80% |
HSBC - Home Value Loan | 5.99% p.a. | 5.99% p.a. |
| 70% |
Qudos Bank - No Frills Home Loan | 5.99% p.a. | 5.99% p.a. |
| 70% |
Hume Bank - liteBlue Investor Variable Rate | 5.99% p.a. | 6.00% p.a. |
| 80% |
P&N Bank - Investor Basic Loan | 5.99% p.a. | 6.00% p.a. |
| 70% |
Greater Bank - Great Rate Home Loan | 5.99% p.a. | 6.01% p.a. |
| 80% |
ubank - Neat Home Loan | 5.99% p.a. | 6.01% p.a. |
| 60% |
Beyond Bank - Purple Basic Variable Investment Home Loan | 5.99% p.a. | 6.02% p.a. |
| 80% |
Newcastle Permanent - Real Deal Investment | 5.99%p.a. | 6.03% p.a. |
| 80% |
Summerland Credit Union - Eco Home Loan | 5.99%p.a. | 6.04% p.a. |
| 80% |
HSBC - Home Value Loan | 6.04% p.a. | 6.04% p.a. |
| 80% |
LCU - Property Investment Mortgage | 5.99% p.a. | 6.05% p.a. |
| 95% |
Tiimely Home - Investment Home Loan (formerly Tic:Toc) | 6.04% p.a. | 6.05% p.a. |
| 90% |
BCU Bank - Basic Home Loan | 6.04% p.a. | 6.05% p.a. |
| 95% |
People's Choice - Basic Home Loan Investor Special | 6.04% p.a. | 6.05% p.a. |
| 80% |
Bank of Sydney - BOS Basic Investment Home Loan | 5.99%p.a. | 6.05% p.a. |
| 60% |
Australian Mutual Bank - 3 Year Fixed Investment | |
---|---|
Fixed interest rate | 5.58% p.a. for 3 years |
Comparison rate^ | 6.48% p.a. |
Features |
|
Maximum loan to value ratio (LVR) | 80% |
RACQ Bank - 5-year Fixed Rate Investor Home Loan (Qld only) | |
Fixed interest rate | 5.59% p.a. for 5 years |
Comparison rate^ | 6.50% p.a. |
Features |
|
Maximum loan to value ratio (LVR) | 60% |
Arab Bank Australia - Fixed Investment Loan (1 year) | |
Fixed interest rate | 5.60% p.a. for 1 year |
Comparison rate^ | 7.91% p.a. |
Features |
|
Maximum loan to value ratio (LVR) | 60% |
Australian Mutual Bank - 2 Year Fixed Investment Special Offer | |
Fixed interest rate | 5.63% p.a. for 2 years |
Comparison rate^ | 6.59% p.a. |
Features |
|
Maximum loan to value ratio (LVR) | 80% |
Easy Street - Fixed Home Loan Investor 3 Year | |
Fixed interest rate | 5.69% p.a. for 3 years |
Comparison rate^ | 5.81% p.a. |
Features |
|
Maximum loan to value ratio (LVR) | 95% |
RACQ Bank - 3-year Fixed Rate Investor Home Loan (Qld only) | |
Fixed interest rate | 5.69% p.a. for 3 years |
Comparison rate^ | 6.75% p.a. |
Features |
|
Maximum loan to value ratio (LVR) | 60% |
Australian Mutual Bank - 2 or 5 Year Fixed Investment | |
Fixed interest rate | 5.73% p.a. for 2 or 5 years |
Comparison rate^ | 6.61% p.a. (2 year); 6.37% p.a. (5 year); |
Features |
|
Maximum loan to value ratio (LVR) | 95% |
Easy Street - Fixed Home Loan Investor 1 & 2 Year | |
Fixed interest rate | 5.89% p.a. for 1 or 2 years |
Comparison rate^ | 5.85% p.a. (1 year); or 5.86% p.a. (2 year) |
Features |
|
Maximum loan to value ratio (LVR) | 95% |
Orange Credit Union - Essential 1 Year Fixed | |
Fixed interest rate | 5.89% p.a. for 1 year |
Comparison rate^ | 6.18% p.a. |
Features |
|
Maximum loan to value ratio (LVR) | 95% |
Greater Bank - Great Rate Investment Home Loan 2 or 3 Year Fixed | |
Fixed interest rate | 5.89% p.a. for 2 or 3 years |
Comparison rate^ | 7.57% p.a. (2 year); 7.38% p.a. (3 year) |
Features |
|
Maximum loan to value ratio (LVR) | 95% |
Greater Bank - Ultimate Investment Home Loan 2 or 3 Year Fixed | |
Fixed interest rate | 5.89% p.a. for 2 or 3 years |
Comparison rate^ | 7.74% p.a. (2 year); 7.57% p.a. (3 year) |
Features |
|
Maximum loan to value ratio (LVR) | 95% |
Newcastle Permanent - 2 or 3 Year Premium Plus Package Investment - Special | |
Fixed interest rate | 5.89% p.a. for 2 or 3 years |
Comparison rate^ | 7.80% p.a. (2 year); 7.63% p.a. (3 year) |
Features |
|
Maximum loan to value ratio (LVR) | 80% |
Arab Bank Australia - Fixed Investment Loan (2 year) | |
Fixed interest rate | 5.90% p.a. for 2 years |
Comparison rate^ | 7.72% p.a. |
Features |
|
Maximum loan to value ratio (LVR) | 60% |
Bank Australia - Basic Home Loan 2 Year Fixed | |
Fixed interest rate | 5.94% p.a. for 2 years |
Comparison rate^ | 5.95% p.a. (max 60% LVR); 5.99% p.a. (max 80% LVR) |
Features |
|
Maximum loan to value ratio (LVR) | Varies |
Queensland Country Bank - Special 1 Year Fixed Package Rate | |
Fixed interest rate | 5.94% p.a. for 1 years |
Comparison rate^ | 6.29% p.a. |
Features |
|
Maximum loan to value ratio (LVR) | 80% |
The Capricornian - Premium Choice Home Loan Fixed 1 Year | |
Fixed interest rate | 5.95% p.a. for 1 year |
Comparison rate^ | 7.35% p.a. |
Features |
|
Maximum loan to value ratio (LVR) | 95% |
BCU Bank - Investment Fixed Rate Loan 3 Year | |
Fixed interest rate | 5.99% p.a. for 3 years |
Comparison rate^ | 6.10% p.a. |
Features |
|
Maximum loan to value ratio (LVR) | 95% |
Orange Credit Union - Essential 2 Year Fixed | |
Fixed interest rate | 5.99% p.a. for 2 years |
Comparison rate^ | 6.17% p.a. |
Features |
|
Maximum loan to value ratio (LVR) | 95% |
Qudos Bank - Fixed Rate Home Loan 3 year | |
Fixed interest rate | 5.99% p.a. for 3 years |
Comparison rate^ | 6.21% p.a. |
Features |
|
Maximum loan to value ratio (LVR) | 80% |
Community First Bank - Accelerator Package Fixed 3 Year | |
Fixed interest rate | 5.99% p.a. for 3 years |
Comparison rate^ | 6.37% p.a. |
Features |
|
Maximum loan to value ratio (LVR) | 95% |
IMB Bank - Fixed Rate Home Loan 3 Year | |
Fixed interest rate | 5.99% p.a. for 3 years |
Comparison rate^ | 6.54% p.a. |
Features |
|
Maximum loan to value ratio (LVR) | 90% |
Illawara Credit Union - Bare Essentials Residential Investment | |
Fixed interest rate | 5.99% p.a. for 2 years |
Comparison rate^ | 7.05% p.a. |
Features |
|
Maximum loan to value ratio (LVR) | 95% |
Orange Credit Union - 1 Year Fixed | |
Fixed interest rate | 5.99% p.a. for 1 years |
Comparison rate^ | 7.08% p.a. |
Features |
|
Maximum loan to value ratio (LVR) | 95% |
Police Credit Union - Investor 1-3 Year Fixed | |
Fixed interest rate | 5.99% p.a. for 1-3 years |
Comparison rate^ | 7.16% p.a. (1 year); 7.04% p.a. (2 year); 6.93% p.a. (3 year) |
Features |
|
Maximum loan to value ratio (LVR) | 80% |
Queensland Country Bank - Special 3 Year Fixed Package Rate | |
Fixed interest rate | 5.99% p.a. for 3 years |
Comparison rate^ | 7.72% p.a. |
Features |
|
Maximum loan to value ratio (LVR) | 80% |
Newcastle Permanent - 2 or 3 Year Premium Plus Package Investment | |
Fixed interest rate | 5.99% p.a. for 2 or 3 years |
Comparison rate^ | 7.82% p.a. (2 year); 7.65% p.a. (3 year) |
Features |
|
Maximum loan to value ratio (LVR) | 80% |
Fixed interest rate | Comparison rate^ | Features | Maximum loan to value ratio (LVR) | |
---|---|---|---|---|
Australian Mutual Bank - 3 Year Fixed Investment | 5.58% p.a. for 3 years | 6.48% p.a. |
| 80% |
RACQ Bank - 5-year Fixed Rate Investor Home Loan (Qld only) | 5.59% p.a. for 5 years | 6.50% p.a. |
| 60% |
Arab Bank Australia - Fixed Investment Loan (1 year) | 5.60% p.a. for 1 year | 7.91% p.a. |
| 60% |
Australian Mutual Bank - 2 Year Fixed Investment Special Offer | 5.63% p.a. for 2 years | 6.59% p.a. |
| 80% |
Easy Street - Fixed Home Loan Investor 3 Year | 5.69% p.a. for 3 years | 5.81% p.a. |
| 95% |
RACQ Bank - 3-year Fixed Rate Investor Home Loan (Qld only) | 5.69% p.a. for 3 years | 6.75% p.a. |
| 60% |
Australian Mutual Bank - 2 or 5 Year Fixed Investment | 5.73% p.a. for 2 or 5 years | 6.61% p.a. (2 year); 6.37% p.a. (5 year); |
| 95% |
Easy Street - Fixed Home Loan Investor 1 & 2 Year | 5.89% p.a. for 1 or 2 years | 5.85% p.a. (1 year); or 5.86% p.a. (2 year) |
| 95% |
Orange Credit Union - Essential 1 Year Fixed | 5.89% p.a. for 1 year | 6.18% p.a. |
| 95% |
Greater Bank - Great Rate Investment Home Loan 2 or 3 Year Fixed | 5.89% p.a. for 2 or 3 years | 7.57% p.a. (2 year); 7.38% p.a. (3 year) |
| 95% |
Greater Bank - Ultimate Investment Home Loan 2 or 3 Year Fixed | 5.89% p.a. for 2 or 3 years | 7.74% p.a. (2 year); 7.57% p.a. (3 year) |
| 95% |
Newcastle Permanent - 2 or 3 Year Premium Plus Package Investment - Special | 5.89% p.a. for 2 or 3 years | 7.80% p.a. (2 year); 7.63% p.a. (3 year) |
| 80% |
Arab Bank Australia - Fixed Investment Loan (2 year) | 5.90% p.a. for 2 years | 7.72% p.a. |
| 60% |
Bank Australia - Basic Home Loan 2 Year Fixed | 5.94% p.a. for 2 years | 5.95% p.a. (max 60% LVR); 5.99% p.a. (max 80% LVR) |
| Varies |
Queensland Country Bank - Special 1 Year Fixed Package Rate | 5.94% p.a. for 1 years | 6.29% p.a. |
| 80% |
The Capricornian - Premium Choice Home Loan Fixed 1 Year | 5.95% p.a. for 1 year | 7.35% p.a. |
| 95% |
BCU Bank - Investment Fixed Rate Loan 3 Year | 5.99% p.a. for 3 years | 6.10% p.a. |
| 95% |
Orange Credit Union - Essential 2 Year Fixed | 5.99% p.a. for 2 years | 6.17% p.a. |
| 95% |
Qudos Bank - Fixed Rate Home Loan 3 year | 5.99% p.a. for 3 years | 6.21% p.a. |
| 80% |
Community First Bank - Accelerator Package Fixed 3 Year | 5.99% p.a. for 3 years | 6.37% p.a. |
| 95% |
IMB Bank - Fixed Rate Home Loan 3 Year | 5.99% p.a. for 3 years | 6.54% p.a. |
| 90% |
Illawara Credit Union - Bare Essentials Residential Investment | 5.99% p.a. for 2 years | 7.05% p.a. |
| 95% |
Orange Credit Union - 1 Year Fixed | 5.99% p.a. for 1 years | 7.08% p.a. |
| 95% |
Police Credit Union - Investor 1-3 Year Fixed | 5.99% p.a. for 1-3 years | 7.16% p.a. (1 year); 7.04% p.a. (2 year); 6.93% p.a. (3 year) |
| 80% |
Queensland Country Bank - Special 3 Year Fixed Package Rate | 5.99% p.a. for 3 years | 7.72% p.a. |
| 80% |
Newcastle Permanent - 2 or 3 Year Premium Plus Package Investment | 5.99% p.a. for 2 or 3 years | 7.82% p.a. (2 year); 7.65% p.a. (3 year) |
| 80% |
An investment loan enables borrowers to buy a property as an investment. Property investors commonly use an investment property loan to finance a property purchase, and then use rental income earned from the property to fund the loan repayments.
Investment loans work in more or less the same way as home loans used for a property to live in. The main difference is that there is usually more risk for lenders in offering loans to investors, so investment property interest rates are usually higher.
Here’s a high level overview of how investment home loans work:
This is the ‘standard’ way to pay off a loan. You make repayments to reduce your loan balance (the principal) AND to cover the interest charged by the lender. Your loan principal reduces over time and your equity increases.
Your repayments are higher than they would be if you were to choose interest only repayment.
With an interest-only home loan, your repayments only go towards covering the cost of interest charged by the lender for a period of time (1-5 years). This means lower repayments initially, but the loan will eventually revert to higher repayments later on when the principal also needs to be repaid.
Having lower payments initially means property investors have more cash available for other investments. There are higher interest costs compared to a principal and interest loan, but interest costs may be tax deductible.
An interest-only investment loan strategy typically relies on property values rising, since the repayments don't help build equity in the property. However, this can be risky because there is no guarantee that your property’s value will increase.
Investment loan rates can be either fixed or variable:
Your interest rate and home loan repayments will stay fixed for a set period of time (1-5 years). This means you won’t be impacted if interest rates go up or down. A fixed rate may appeal to investors looking for certainty – for example, knowing that rental income will be sufficient to cover the loan repayments during the fixed rate period.
If your investment loan rate is variable, it could go up or down at any time, and so too would your loan repayments. The potential upside of a variable rate loan for investors is it’s more likely you’ll have access to loan features like an offset account, plus the flexibility to repay the loan early without penalty fees.
Most lenders also offer the option of a split rate loan which means part of the loan is on a fixed rate and part is variable. Investors who choose a split option have the flexibility to decide what portion of their loan they want to fix and how much will remain on a variable rate – 50:50, 60:40, 70:30 etc.
These are loans specifically designed for investors purchasing a property through a self-managed super fund (SMSF). The requirements for getting an investment loan through an SMSF are more complex than standard loans, but they can be appealing to some investors.
“With an SMSF loan or family trust loan, the banks don't take into consideration anything that's sitting outside the fund or trust” explains Mansour Soltani, Money.com.au's home loans expert.
“This works in reverse too, meaning if you plan to make further personal investments in future, the SMSF loan will not impact your borrowing capacity.”
A limited number of Australian lenders (e.g. Commbank and loans.com.au) offer specialised investment loans for energy efficient homes. These usually have a discounted interest rate versus the lender’s standard investment loan rates, but the eligibility criteria for these are usually quite strict.
Investors with an existing property may be able to borrow extra funds for renovations or other investments by taking out a line of credit that’s secured by their existing property. This gives ongoing access to credit up to a limit. Interest is usually only charged on funds drawn down.
“If you’re considering interest-only, you need to know what your plan is for actually paying down the debt. Some people with more than one investment property will sell one of their properties to pay off the other debt on the others, but what if you only have one investment property? Speak to your accountant or financial advisor to discuss your exit strategy.”
Mansour Soltani, Money.com.au's home loan expert
Interest will be the main cost of your investment loan. While interest costs may be tax deductible for some investors, a competitive interest will reduce your investment costs and free up cash to use elsewhere.
Like interest, loan fees may be tax deductible depending on your situation, but unless you’re getting something valuable in return for paying the fee (like access to an offset account), they’re generally best avoided.
For example, do the loans you’re comparing offer an interest-only option, or the ability to split the loan between a fixed and variable interest rate?
Particularly for investors who plan to repay the loan early (e.g. having sold the property), being able to pay out the loan early without penalty could be valuable.
For example, what is the maximum loan-to-value ratio and can you apply through a trust or SMSF?
“An offset account is a must for most property investors,” according to Money.com.au’s home loans expert Mansour Soltani. This allows you to reduce interest costs by keeping cash in a transaction account linked to your home loan.
For investment loans, a redraw facility and offset account are both ways for borrowers to save on interest using any excess cash, while still maintaining access to that cash. Here’s how they each work in a nutshell:
Offset account: Your home loan has a linked transaction account, the balance of which reduces or ‘offsets’ that balance of your home loan for the purpose of charging interest.
Redraw facility: Allows you to make extra repayments on your loan and then withdraw that money again if you need it.
“Most investors prefer an offset account because of the tax implications. Basically an offset account allows you to withdraw funds from your home loan for personal use, without it impacting any interest tax deductions. On the other hand, accessing money through redraw may limit your ability to claim tax deductions. Always speak to your accountant or financial advisor to fully understand the tax implications based on your situation.”
Mansour Soltani, Money.com.au's home loan expert
Applying for an investment home loan is usually as simple as completing an application form with the lender and providing supporting information to prove you’re eligible, including:
Each lender has its own eligibility rules for investment loans based on how much tolerance it has for risk. But as a general rule, your chances of approval for an investment loan may be better if:
If you're unable to meet the eligibility criteria for standard banks and mainstream lenders, a low doc home loan could be an alternative avenue worth cosnidering.
Negative gearing is when a property investor is making a loss because the costs of owning and maintaining a property (interest and other costs) are higher than the rental income the property generates.
While this may sound like a bad situation, in some cases being negatively geared can have tax benefits. That’s because, according to the ATO, investors may be able to claim losses from investment properties to offset tax they need to pay on other sources of income.
If you’re new to property investment it may be a good idea to have an accountant help you with your tax return to make sure you claim deductions correctly and that your property is as tax efficient as possible.
Mansour says he generally recommends that investors should have a deposit of at least 10% of the property's value. But it can be possible to get an investment property loan with a deposit of as little as 5%. In other words, on a $500,000 property you could potentially borrow up to 95% of the property’s value, or $450,000.
How much of a deposit you need will also depend on other aspects of your loan application, the type of property you’re buying and the specific lender you apply with.
If your deposit is less than 20% of the property value (in other words your loan-to-value ratio is above 80%), you may need to pay for lenders mortgage insurance (LMI) to protect the lender from the higher risk of lending to you. This is a big up-front cost, but is usually simply added to the loan amount and may be tax deductible.
To access the best investment loan rates, you generally need to be borrowing less than 60% of the property’s value (i.e. 60% LVR or lower).
Depending on your situation, interest charged on your investment loan may be tax deductible.
According to the ATO, you can claim the interest charges on a loan used to:
You can’t claim interest as a deduction for any period of time you were using the property for private use.
Always get advice from a qualified tax professional to understand how any tax implications may apply to you.
Investment loans typically have higher interest rates than owner-occupier home loans, but not always.
For example, while investor loan rates may be higher overall, an investor with a low LVR who is eligible to apply with a wide range of lenders could qualify for a lower interest rate than an owner occupier looking for a low-deposit home loan.
To compare investment loans use a comparison site, speak to a mortgage broker or do your own research by visiting each lender’s website. In general, you should compare loans by looking at:
Most investment loans feature the option to make interest-only repayments for a set period of time. However, banks tend to be stricter when it comes to approving interest-only home loans.
Home Loans guides and resources
What's the next step on your property journey? Our home loan guides will help you navigate the road ahead, whether you're buying, building or looking to save on an existing loan.