Best Investment Home Loan Rates Compared 2023

  • See the top investment home loan rates, starting from 5.60% p.a. (7.91% p.a. comparison rate^).
Investment property home loans
Investment property home loans

In our investment property home loans guide:

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5

7

2

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6

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7

Best investment loan rates comparison (variable loans)

The table below shows a selection of the best variable investment home loan rates currently available. These rates are based on principal and interest repayments and the table is sorted by the lowest comparison rate, then the lowest interest rate.

Easy Street - Street Smart Variable

Variable interest rate

5.79% p.a.

Comparison rate^

5.84% p.a.

Features
  • 100% offset account
  • Redraw facility
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
  • Extra repayments allowed
  • Free redraw
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
  • Extra repayments allowed
  • Free online redraw
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
  • Extra repayments allowed
  • Free redraw
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
  • Extra repayments allowed with redraw
  • Parental pause
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
  • Extra repayments allowed
  • Free redraw
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
  • Extra repayments allowed
  • Free redraw
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
  • Extra repayments allowed
  • Redraw facility
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
  • Extra repayments allowed
  • Redraw facility
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
  • Extra repayments with redraw
  • Annual loyalty disciunt of 0.01% p.a.
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
  • Extra repayments allowed with redraw
  • Parental pause
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
  • Extra repayments with redraw
  • 100% offset
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
  • Extra repayments allowed
  • Redraw facility
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
  • Extra repayments allowed
  • Redraw facility
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
  • Extra repayments allowed
  • Free online redraw
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
  • Extra repayments allowed
  • Redraw facility
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
  • Extra repayments allowed
  • Free redraw
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
  • Extra repayments allowed
  • Redraw facility
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
  • Extra repayments allowed
  • Free redraw
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
  • Extra repayments allowed
  • Redraw facility
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
  • Extra repayments allowed
  • Free redraw
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
  • Extra repayments allowed
  • Redraw facility
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
  • Extra repayments with redraw
  • 100% offset
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
  • Extra repayments allowed
  • Redraw facility
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
  • Extra repayments allowed
  • Redraw facility
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
  • Extra repayments allowed
  • Redraw facility
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
  • Extra repayments allowed
  • Redraw facility
Maximum loan to value ratio (LVR)

60%

Variable interest rate Comparison rate^FeaturesMaximum loan to value ratio (LVR)

Easy Street - Street Smart Variable

5.79% p.a.

5.84% p.a.

  • 100% offset account
  • Redraw facility

95%

Pacific Mortgage Group - Investment Variable Home Loan

5.89% p.a.

5.89% p.a.

  • Extra repayments allowed
  • Free redraw

80%

Hume Bank - liteBlue Investor Variable Rate

5.89% p.a.

5.90% p.a.

  • Extra repayments allowed
  • Free online redraw

95%

Beyond Bank - Purple Basic Variable Investment Home Loan

5.89% p.a.

5.92% p.a.

  • Extra repayments allowed
  • Free redraw

90%

Bank Australia - Basic Home Loan

5.89% p.a.

5.94% p.a.

  • Extra repayments allowed with redraw
  • Parental pause

60%

Community First Bank - Basic Home Loan Investor

5.89% p.a.

5.94% p.a.

  • Extra repayments allowed
  • Free redraw

95%

Summerland Credit Union - Eco Home Loan

5.89% p.a.

5.94% p.a.

  • Extra repayments allowed
  • Free redraw

60%

HSBC - Home Value Loan

5.94% p.a.

5.94% p.a.

  • Extra repayments allowed
  • Redraw facility

60%

BCU Bank - Basic Home Loan

5.94% p.a.

5.95% p.a.

  • Extra repayments allowed
  • Redraw facility

70%

Unloan - Investment Home Loan

6.04% p.a.

5.95% p.a.

  • Extra repayments with redraw
  • Annual loyalty disciunt of 0.01% p.a.

80%

Bank Australia - Basic Home Loan

5.94% p.a.

5.99% p.a.

  • Extra repayments allowed with redraw
  • Parental pause

80%

Police Credit Union - Better Home Loan Investmetn Special

5.94% p.a.

5.99% p.a.

  • Extra repayments with redraw
  • 100% offset

80%

HSBC - Home Value Loan

5.99% p.a.

5.99% p.a.

  • Extra repayments allowed
  • Redraw facility

70%

Qudos Bank - No Frills Home Loan

5.99% p.a.

5.99% p.a.

  • Extra repayments allowed
  • Redraw facility

70%

Hume Bank - liteBlue Investor Variable Rate

5.99% p.a.

6.00% p.a.

  • Extra repayments allowed
  • Free online redraw

80%

P&N Bank - Investor Basic Loan

5.99% p.a.

6.00% p.a.

  • Extra repayments allowed
  • Redraw facility

70%

Greater Bank - Great Rate Home Loan

5.99% p.a.

6.01% p.a.

  • Extra repayments allowed
  • Free redraw

80%

ubank - Neat Home Loan

5.99% p.a.

6.01% p.a.

  • Extra repayments allowed
  • Redraw facility

60%

Beyond Bank - Purple Basic Variable Investment Home Loan

5.99% p.a.

6.02% p.a.

  • Extra repayments allowed
  • Free redraw

80%

Newcastle Permanent - Real Deal Investment

5.99%p.a.

6.03% p.a.

  • Extra repayments allowed
  • Redraw facility

80%

Summerland Credit Union - Eco Home Loan

5.99%p.a.

6.04% p.a.

  • Extra repayments allowed
  • Free redraw

80%

HSBC - Home Value Loan

6.04% p.a.

6.04% p.a.

  • Extra repayments allowed
  • Redraw facility

80%

LCU - Property Investment Mortgage

5.99% p.a.

6.05% p.a.

  • Extra repayments with redraw
  • 100% offset

95%

Tiimely Home - Investment Home Loan (formerly Tic:Toc)

6.04% p.a.

6.05% p.a.

  • Extra repayments allowed
  • Redraw facility

90%

BCU Bank - Basic Home Loan

6.04% p.a.

6.05% p.a.

  • Extra repayments allowed
  • Redraw facility

95%

People's Choice - Basic Home Loan Investor Special

6.04% p.a.

6.05% p.a.

  • Extra repayments allowed
  • Redraw facility

80%

Bank of Sydney - BOS Basic Investment Home Loan

5.99%p.a.

6.05% p.a.

  • Extra repayments allowed
  • Redraw facility

60%

Rates are current as of 13 November 2023. ^Warning: Comparison rates are calculated based on a loan amount of $150,000 repaid over a 25-year term with monthly repayments. Different loan amounts and terms will result in different comparison rates. Check with the provider for full loan details, including rates, fees, eligibility and terms and conditions to make sure the product is right for you. While this is an extensive list of the lowest-rate variable investment home loans in Australia, we can't guarantee that all loans available in the market are shown.

Best investment loan rates comparison (fixed loans)

The table below shows a selection of the best fixed investment home loan rates currently available. These rates are based on principal and interest repayments and the table is sorted by the lowest interest rate, then the lowest comparison rate.

Australian Mutual Bank - 3 Year Fixed Investment

Fixed interest rate

5.58% p.a. for 3 years

Comparison rate^

6.48% p.a.

Features
  • Advanced payments up to $20k during fixed period
  • Redraw allowed
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
  • Make extra repayments up to $10k/year
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
  • Automatic repayments
  • Loan portability available
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
  • Advanced payments up to $20k during fixed period
  • Redraw allowed
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
  • 100% offset account
  • Redraw facility
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
  • Make extra repayments up to $10k/year
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
  • Advanced payments up to $20k during fixed period
  • Redraw allowed
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
  • 100% offset account
  • Redraw facility
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
  • Redraw available
  • Offset available
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
  • Make extra repayments (fees may apply)
  • Redraw available
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
  • Make extra repayments (fees may apply)
  • Redraw available
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
  • $2,000 cashback (T&Cs apply)
  • Extra repayments and redraw
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
  • Automatic repayments
  • Loan portability available
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
  • Parental pause
  • Interest only option available
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
  • Extra repayments up to $10k/year
  • 100% mortgage offset
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
  • 100% offset available
  • Interest only option available
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
  • Extra repayments up to $25k during fixed term
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
  • Redraw available
  • Offset available
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
  • Extra repayments up to $10k/year
  • Split loan option
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
  • Extra repayments with redraw
  • 100% offset account
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
  • $2,500 cashback (max LVR 80%, $250k min loan, T&Cs apply)
  • Free online and mobile redraw
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
  • Split loan option
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
  • Redraw available
  • Offset available
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
  • Extra repayments up to $20k/year
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
  • Extra repayments up to $10k/year
  • 100% mortgage offset
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
  • $2,000 cashback (T&Cs apply)
  • Extra repayments and redraw
Maximum loan to value ratio (LVR)

80%

Fixed interest rate Comparison rate^FeaturesMaximum loan to value ratio (LVR)

Australian Mutual Bank - 3 Year Fixed Investment

5.58% p.a. for 3 years

6.48% p.a.

  • Advanced payments up to $20k during fixed period
  • Redraw allowed

80%

RACQ Bank - 5-year Fixed Rate Investor Home Loan (Qld only)

5.59% p.a. for 5 years

6.50% p.a.

  • Make extra repayments up to $10k/year

60%

Arab Bank Australia - Fixed Investment Loan (1 year)

5.60% p.a. for 1 year

7.91% p.a.

  • Automatic repayments
  • Loan portability available

60%

Australian Mutual Bank - 2 Year Fixed Investment Special Offer

5.63% p.a. for 2 years

6.59% p.a.

  • Advanced payments up to $20k during fixed period
  • Redraw allowed

80%

Easy Street - Fixed Home Loan Investor 3 Year

5.69% p.a. for 3 years

5.81% p.a.

  • 100% offset account
  • Redraw facility

95%

RACQ Bank - 3-year Fixed Rate Investor Home Loan (Qld only)

5.69% p.a. for 3 years

6.75% p.a.

  • Make extra repayments up to $10k/year

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);

  • Advanced payments up to $20k during fixed period
  • Redraw allowed

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)

  • 100% offset account
  • Redraw facility

95%

Orange Credit Union - Essential 1 Year Fixed

5.89% p.a. for 1 year

6.18% p.a.

  • Redraw available
  • Offset available

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)

  • Make extra repayments (fees may apply)
  • Redraw available

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)

  • Make extra repayments (fees may apply)
  • Redraw available

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)

  • $2,000 cashback (T&Cs apply)
  • Extra repayments and redraw

80%

Arab Bank Australia - Fixed Investment Loan (2 year)

5.90% p.a. for 2 years

7.72% p.a.

  • Automatic repayments
  • Loan portability available

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)

  • Parental pause
  • Interest only option available

Varies

Queensland Country Bank - Special 1 Year Fixed Package Rate

5.94% p.a. for 1 years

6.29% p.a.

  • Extra repayments up to $10k/year
  • 100% mortgage offset

80%

The Capricornian - Premium Choice Home Loan Fixed 1 Year

5.95% p.a. for 1 year

7.35% p.a.

  • 100% offset available
  • Interest only option available

95%

BCU Bank - Investment Fixed Rate Loan 3 Year

5.99% p.a. for 3 years

6.10% p.a.

  • Extra repayments up to $25k during fixed term

95%

Orange Credit Union - Essential 2 Year Fixed

5.99% p.a. for 2 years

6.17% p.a.

  • Redraw available
  • Offset available

95%

Qudos Bank - Fixed Rate Home Loan 3 year

5.99% p.a. for 3 years

6.21% p.a.

  • Extra repayments up to $10k/year
  • Split loan option

80%

Community First Bank - Accelerator Package Fixed 3 Year

5.99% p.a. for 3 years

6.37% p.a.

  • Extra repayments with redraw
  • 100% offset account

95%

IMB Bank - Fixed Rate Home Loan 3 Year

5.99% p.a. for 3 years

6.54% p.a.

  • $2,500 cashback (max LVR 80%, $250k min loan, T&Cs apply)
  • Free online and mobile redraw

90%

Illawara Credit Union - Bare Essentials Residential Investment

5.99% p.a. for 2 years

7.05% p.a.

  • Split loan option

95%

Orange Credit Union - 1 Year Fixed

5.99% p.a. for 1 years

7.08% p.a.

  • Redraw available
  • Offset available

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)

  • Extra repayments up to $20k/year

80%

Queensland Country Bank - Special 3 Year Fixed Package Rate

5.99% p.a. for 3 years

7.72% p.a.

  • Extra repayments up to $10k/year
  • 100% mortgage offset

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)

  • $2,000 cashback (T&Cs apply)
  • Extra repayments and redraw

80%

Rates are current as of 13 November 2023. ^Warning: Comparison rates are calculated based on a loan amount of $150,000 repaid over a 25-year term with monthly repayments. Different loan amounts and terms will result in different comparison rates. Check with the provider for full loan details, including rates, fees, eligibility and terms and conditions to make sure the product is right for you. While this is an extensive list of the lowest-rate fixed investment home loans in Australia, we can't guarantee that all loans available in the market are shown.

How do investment property home loans work?

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:

  • A lender will assess your application based on your financial situation, how much of a deposit you have (or equity in a property you already own) and the property you plan to buy.
  • If approved, the loan funds are released and the loan will be secured by the investment property.
  • You repay the loan gradually, generally using rental income from the property, or through sale funds if you sell the property down the track.
  • Interest and fees paid on an investment property loan may be tax deductible according to the Australian Taxation Office (ATO).
  • It's common for investors to use equity they have built up in an existing property to borrow more money for another investment by refinancing the loan.

Types of investment home loans

Principal and interest home loans

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.

Interest-only investment home loans

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:

Fixed rate investment loan

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.

Variable rate investment loan

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.

Split rate loan

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.

Investors with an interest-only loan need an 'exit strategy'

Mansour Soltani

“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

How to compare investment home loans

1

Interest rate

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.

2

Fees

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.

3

Loan structure

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?

4

Repayment flexibility

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.

5

Eligibility

For example, what is the maximum loan-to-value ratio and can you apply through a trust or SMSF?

6

Useful loan features

“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.

Offset account versus redraw on investment loans

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.

Mansour Soltani

“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 loan

How to apply for an investment home loan

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:

  • Proof of identity
  • Proof of income (e.g. salary or rental income if you own other investment properties)
  • Proof of expenses (e.g. bank statements)
  • Proof of assets you own (e.g. any other property)
  • Proof of liabilities (e.g. loan statements)

How to get your investment loan approved

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:

  • You have at least a 10% deposit or equity in another property.
  • You don’t have very high levels of existing debt relative to your income (debt to income ratio).
  • You don't have major issues in your credit history, although even if you do, some lenders offer bad credit home loans.
  • You’re buying a property in an area with high occupancy rates for rental properties.
  • You’re buying the right kind of property (studio apartments can be an issue for some banks, according to our home loans expert, Mansour.
  • You apply with the help of a mortgage broker, particularly if you are a first-time investor, or your situation is complicated.

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.

Investment home loans FAQ

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:

  • buy a rental property
  • buy a depreciating asset for the rental property (e.g. an air conditioner for the rental property)
  • make repairs to the rental property
  • finance renovations and extensions to the rental property, which is currently rented out, or which you intend to rent out.

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:

  • Interest rate and comparison rate
  • Fees
  • Loan features

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.

Written by

Sean Callery Editor Money.com.au

Editor

Sean Callery

Reviewed by

Mansour Soltani home loan expert

Home Loans Expert

Mansour Soltani

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