Compare Investment Property Home Loan Rates

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Getting an investment property loan with a competitive interest rate is essential when you want to maximise your profits.

Every property investor wants to get the most out of their investment. This means finding a competitive investment property loan with a good rate and useful features. It also means having a strategy in place. Read on to learn more about property investment or start comparing loans in the table below.

Investment Property Home Loan Offer

loans.com.au Essentials - Smart Loan Package P&I

3.89 % p.a.

variable rate

3.91 % p.a.

comparison rate

Investment Property Home Loan Offer

Apply for the loans.com.au Essentials - Smart Loan Package P&I and get a low variable interest rate, plus no application and ongoing fees.

  • Interest rate of 3.89% p.a.
  • Comparison rate of 3.91% p.a.
  • Application fee of $0
  • Maximum LVR: 80%
  • Minimum borrowing: $50,000
  • Max borrowing: $2,000,000
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How do I compare investment property loans?Icon of wallet and magnifying glass

When comparing investment loans you need to look closely at the following factors:

  • Rates. Rates have a big influence on your repayment size, so be sure to compare loans and find one with the right rates, in addition to features and minimal fees. Also compare fixed and variable rates to find one which will suit your investment strategy.
  • Eligibility. Make sure the loan fits your investment strategy. Not every home loan will be available for commercial property, for example, and some loans will have limits on square meterage. Others will not be available for certain property types, such as inner city apartments.
  • Investor benefits. If you’re investing you might want to ensure your home loan has features which can maximise tax benefits or maximise cash flow. This includes interest-only options, interest in advance options, and 100% offset accounts.
  • Fees. Fees aren’t necessarily a sign of a bad loan, as long as what you’re paying for will save you money or reduce your loan costs over the life of your loan. If your loan has an annual fee for example, it may come with flexible terms which allow you to use it as you want to. Compare not only application, valuation and legal fees but also ongoing fees for features such as offset accounts and redraw facilities, and monthly fees.
  • Features. This depends on how you plan to use your loan. If you plan to put extra funds towards your home loan, ensure that your lender won’t penalise you. If you want to get access to these extra funds, seek one with a redraw facility.

Use our investment property loan calculator to estimate your repayments

How are investment loans different to owner occupier loans?

Investment loans represent a higher risk than regular home loans. Home loans for investment often have stricter lending requirements and borrowing limits, plus higher interest rates.

An investment home loan may have a higher LVR, requiring the borrower to save up a larger deposit.

Like other types of home loan, investment home loans come in various forms, including fixed or variable interest rate, or principal and interest or interest only.

I already own a property - can I use the equity to get an investment loan?

If you already own property you can use the equity in that property as a deposit on an investment loan. This means you don't need to save up a deposit.

To calculate the equity in your property simply subtract the amount of money you owe on the property from the value of the property.

Calculating the equity in your property

  • Your home is valued at $750,000
  • You owe $200,000 on the property
  • Your equity = $550,000

With a line of credit loan you can borrow up to 80% of the value of the equity in your property. You can use this to fund an investment property. Compare line of credit home loans here.

What strategies can I use to make a profit on my property investment?Profit chart

Savvy investors can look at multiple property investment strategies. These include:

  • Negative Gearing. If the expenses on an investment property are greater than the income it generates you're making a loss. In Australia this loss can be used as a tax deduction, which is called negative gearing. It's a good strategy to cover early losses while waiting for your investment's capital gain to grow. Learn more about negative gearing.
  • Buy and Hold. The simplest investment strategy. You purchase a property and hold it with the expectation that the property will grow in value over time. This strategy can be combined with negative gearing.
  • Renovate. Buy a property in need of work, renovate it into a far better property and you'll raise the property's value. This requires a lot of hard work and money but with the right property, the right renovations and the right market it can be a great investment strategy. Whenever you renovate a property, property investment experts believe you should first seek the advice of local real estate agents to find out what prospective buyers are looking for.
  • Passive property development. Most people won't undertake a major property development themselves. But passive property development allows you to stump up the cash to someone else who develops it for you. It's easier than going into property development yourself, but it's not without risks.

Watch: Investment strategies explained in under 3 minutes

 

Some unique ways to invest in property

While most property investors will choose to put their money in residential property for either capital growth or rental income, there are a variety of other strategies available for those looking to get into property investment:

  • Investing overseas. There are a range of overseas property markets that are popular with Australians, including America and the UK. However, Australians who decide to invest in overseas property should be mindful of the exchange currency risk. Investing in overseas property may also require extensive research and the ability to get acquainted with local professionals, such as a trusted buyers agent, to ensure that the location and property is a viable investment.
  • Investing through SMSFs. Those with self-managed super funds (SMSFs) can use their super funds to invest in property. These investments require separate loans which require additional documents and processing. You'll want to seek out help from an accountant, solicitor or financial planner before deciding to invest with your SMSF.
  • Investing through REITs. A Real Estate Investment Trust (REIT) is a portfolio of properties listed on the ASX. Investors can buy into these portfolios in a similar way to shares. REITs can be comprised of Australian properties and foreign properties.
  • Investing in commercial properties. Other investors might invest in commercial properties, including warehouses, factories, offices and retail shops. These can have higher rental incomes, but finding tenants can be difficult.
  • Fractional property investment. Rather than buying a whole property, fractional investing allows you to buy a share in a property like you would with a company. It's similar to REITs but gives you more options and flexibility.

About investing in real estate

Weighing up the benefits and the risks

As with any investment, choosing to invest in property carries both benefits and risks. It's important you weigh up the pros and cons of property investment before you decide if the strategy is right for you.

Property investing benefits

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  • Rental income. An investment property can increase your cash flow by providing you with a second income source through rental income. A well-located investment property could provide 3-5.5% rental yield. When it comes time to sell your property, you may be able to benefit from making a capital gain.
  • Flexibility. An investment property is one of the few investments that is physically tangible. If your situation changes and you no longer wish to use your property as an income-producing asset, you can always move into it. However, be mindful that there may be capital gains tax implications if you choose to do this.
  • Tax and depreciation benefits. If you have a knowledgeable accountant and quantity surveyor, there’s plenty of room to take advantage of certain tax advantages of property investment, including negative gearing.
  • Control. Unlike other asset classes such as shares, many aspects of your property investment can be controlled. You can carry out value-adding activities on your property such as renovations, refinance your home loan if you find a better rate or turn your property into a boarding house.

Property investing risks

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  • Costs. Buying a property can be costly, depending on the size and location. There are also many other upfront costs you may have to pay, including lenders mortgage insurance (LMI), stamp duty, building and pest inspections, conveyancing and legal charges. As the owner of the property, you'll also be responsible for covering ongoing costs such as repairs and maintenance, property management fees, council taxes, etc.
  • Interest rate rises. Because many investors use home loans to finance investment properties, interest rates can play a major part in increasing or reducing costs. If interest rates go up, you’ll have a higher repayment.
  • Selling a property takes time. Unlike shares and other investments, selling property can take a while and usually requires assistance from professionals such as a real estate agents, accountants and conveyancers. This means if you think you might need your investment cash on short notice, then property might not be for you. Also unlike shares, you can’t sell portions of your investment property off if you need the cash quickly.
  • Untenanted periods. If you rely on rental income to help pay off your property invetment loan, you face the risk of untenanted periods which means that you may suffer financially. This is why it's important to take precautionary measures such as ensuring you have a cash buffer.

Compare some of today's great investment rates at a glance

Frequently asked questions about investment property loans and investing

What kinds of loans can property investors use?

There are a range of different loans available when investing in property. Each has different benefits, negatives and uses.

  • Package home loans - Package loans basically bundle a regular variable, fixed rate or split rate loan from a lender with other products such as transaction accounts, credit cards, insurance and personal loans. These types of loans usually come with an annual fee, but in return you get discounted interest rates and waivers on some upfront fees.
  • No-frills loans - A no-frills or basic home loan offers minimal features in exchange for a lower interest rate and fees.
  • SMSF loans - If you plan to purchase an investment property through your SMSF you need to use an SMSF home loan. These loans have more complex documentation and structures than regular home loans. These loans are usually ‘limited recourse’ loans, meaning if you default on the loan the lender is limited to the asset and nothing else.
  • Low doc loans - If you’re a full-time investor or self-employed borrower you might not be able to prove your income in the way that those receiving a salary might be able to. Low doc loans require less documentation, but can come with higher interest rates and in some cases higher fees. They might also come with lower maximum LVRs.
  • Bad credit loans - Even investors with bad marks on their credit file may still be able to get home loans to finance investment property purchases. Bad credit home loans generally come with higher interest rates and more restrictive conditions to help minimise the risk a lender takes on by granting these loans.
  • Line of credit loans - Also known as home equity loans, these are revolving lines of credit which utilise the equity in your home to finance an investment property. These loans may also be able to be used to buy overseas properties.
  • Bridging home loans - These loans are short-term loans designed to be used to purchase a property before your existing property is sold. These can have higher fees and rates compared with regular home loan, and have a higher risk as you may be stuck with your first property for longer than you envisioned, leaving you with two investment properties.
  • Construction home loans - A construction home loan allows you to save interest as you build a property. This is because these loans enable you to access funds at the different stages when a builder will require funds, meaning you only pay interest on the amounts you've had to draw down.

Do I need a deposit for an investment property loan?

In most cases lenders will lend a maximum of 95% of the property value to investors. 100% and 105% loans have largely gone from the market after the GFC. Today, no deposit loans are generally only available for home buyers with a family guarantee. This means you should have at least a 5% deposit available.

What tax benefits are available for investment properties?

Property tax deductions and negative gearing are generally the two main tax benefits when it comes to investment properties. You can claim on the depreciation on the physical building, as well as what’s inside it. If used effectively, this strategy can help with your cash flow.

I’m overwhelmed by the amount of choice in the home loan market, what should I do?

There are many loans in the Australian market, so it might be a good idea to seek the services of a qualified mortgage broker. They’ll listen to what you want out of your home loan and then compare loans from a variety of lenders to find one which will suit you. Brokers are generally free to you as they’re paid a commission by the lender instead.

Do I have to pay capital gains tax on my investment property if I sell it?

Unless your property was purchased before September 20 1985 you’ll generally have to pay capital gains tax, unless your property makes no profit, or makes a loss. There’s a 50% discount available for those who hold onto their property for longer than 12 months. There are also some cases in which you can avoid paying this tax.

Need help finding an investment loan? Talk to a mortgage broker

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This page was last modified on 17 November 2017 at 4:36pm.

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27 Responses

  1. Default Gravatar
    SonjaAugust 9, 2016

    Hi

    I applied for an owner/occupier home loan with a bank but they were unable to offer me the amount I wanted. I was advised by them that I could instead apply for a loan as an investor which would obtain me a higher loan amount as they would factor in potential rental income – and then after obtaining the loan, advising them I’d ‘changed my mind’ and wished to live in the property and switch to the occupier home loan instead.

    This seems kind of ‘dodgy’ to me – is it legal? Are there any ramifications to doing this, eg is stamp duty and taxes higher on investment properties than on owner/occupied?

    thanks a lot

    Sonja

    • Staff
      MayAugust 10, 2016Staff

      Hi Sonja,

      Thank you for your inquiry and for contacting finder.com.au we are a financial comparison website and general information service we are not mortgage specialists so can only offer general advice.

      Different lenders/banks actually have their own set of eligibility criteria, for instance, for a home loan product. But most likely, when deciding on how much you can borrow, they use important criteria such as your income, outstanding debt level and credit history.

      For instance, the bank you have spoken with may have found that you can get a better offer on their investment home loan than that of the occupier home loan product. But, generally, occupier home loans carry a lower interest rate than loans offered to investors. You can find more information about occupier home loan on this page and how this differ to an investment home loan.

      Whilst it’s good that you have prepared yourself and determined how much you will borrow, it is also important to take into account the eligibility criteria offered by most lenders. This way, you will have a fairly good idea of whether or not you’ll be approved for a certain loan. Alternatively, you can also get a professional advice from a mortgage broker who can give you home loan options available for your specific situation.

      Furthermore, you may like to read our guide about know how much you can borrow on a mortgage, which you might find useful as well.

      I hope this can help.

      Cheers,
      May

  2. Default Gravatar
    KarenMarch 8, 2016

    We are building a house on land that we own. We may rent we may choose to live in the house. Are we able to take out a home loan even if we choose to rent the property once built?

    • Staff
      BelindaMarch 10, 2016Staff

      Hi Karen,

      Thanks for reaching out.

      At the time of applying for a home loan, you’ll need to have a fairly clear idea of whether the loan is for owner-occupier or investment purposes. This is because the structure of the loan will be catered to the loan purpose and your needs. For instance, if you initially took out an owner-occupier line of credit home loan but then later decided to turn the property into an investment, you would not benefit from tax incentives from this kind of structure.

      However, circumstances do change. Your best course of action would be to speak to a licensed mortgage broker regarding your borrowing options and the best type of loan for your purchase.

      Thanks,
      Belinda

  3. Default Gravatar
    DebJanuary 20, 2016

    Am I eligible to apply for an ‘investment loan” if just buying a vacant block of land?

    • Staff
      BelindaJanuary 21, 2016Staff

      Hi Deb,

      Thanks for reaching out.

      This will depend on the lender’s eligibility criteria for the home loan. Above on this page you can compare a range of home loans that are suited for investment purposes and you can fill out the form to speak to a mortgage broker to discuss your borrowing options.

      Alternatively, you learn more about vacant land home loans here and compare construction home loans on this page.

      Due to the conservative approach that lenders take towards vacant land home loans, many offer a lower maximum loan-to-value (LVR) ratio and as a result you may need to save a larger deposit.

      Kind regards,
      Belinda

  4. Default Gravatar
    craigNovember 25, 2015

    Are your investment loan rates applicable to a self managed super fund?

  5. Default Gravatar
    HelenAugust 20, 2015

    what is LVR?

    • Staff
      BelindaAugust 20, 2015Staff

      Hi Helen,

      Thanks for your enquiry.

      The loan-to-value (LVR) ratio refers to the size of a loan in relation to the value of a property, expressed as a percentage.

      For instance, if you’re looking to purchase a property for $500,000 and you need a loan of $400,000 to purchase it, then your LVR would be 80%.

      You can read about how to calculate the LVR for your loan on this page.

      I hope this clarifies things for you.

      Thanks,
      Belinda

  6. Default Gravatar
    IdaAugust 12, 2015

    Hello Belinda
    I am looking to refinance my investment loan, I am renting out a factory. Could you help me please.

    • Staff
      BelindaAugust 13, 2015Staff

      Hi Ida,

      Thanks for your enquiry.

      finder.com.au is an online comparison service so we can’t offer personalised advice about how to refinance your investment loan, but rather we can offer general information to help you make a more informed decision.

      On this page and this page you can read our property investment guide and learn about the process involved when refinancing. You can also compare a range of home loans that are suited for investment purposes.

      Please be mindful of any switching or exit fees you may be charged by your existing lender as well as the application fees charged by your new lender. You can use our refinancing calculator here to weigh up the costs involved.

      Thanks,
      Belinda

  7. Default Gravatar
    JacksonJune 26, 2015

    Hi.
    My question is in regards to LMI when accessing equity.
    let say I bought A property with an LVR of 95% and paid LMI. If I access some equity or refinance whilst keeping the new LVR at 95% would I have to pay LMI again? if so would it be the full amount or just the difference? and how ould this be calculated. I dont want to wait untill I have enough equity to take some money and have a remaining LVR of 80%.

    Thanks

    • Staff
      JodieJune 26, 2015Staff

      Hi Jackson,

      Thank you for contacting finder.com.au, a financial comparison website.

      LMI is due in full on any loan that goes above 80% LVR no matter if it is a new loan or refinancing from an old loan and it calculated on based on the specifics of the loan.

      Your property price may have gone up so you may be able to refinance without incurring LMI, you may be eligible for a rebate from your current LMI policy all you have to do is discuss this with the provider of your LMI.

      If you are looking to refinance in order to purchase an investment property we have a page that gives great tips on refinancing for investments.

      Regards
      Jodie

  8. Default Gravatar
    Mandy20June 19, 2015

    Hi
    My husband and are both looking for a rural property in Victoria we would like to build within 3years so who is the best lender and does it matter if we have other debts (only4)
    Thanks

    • Staff
      BelindaJune 22, 2015Staff

      Hi Mandy,

      Thanks for your enquiry.

      Please note that finder.com.au is an online comparison website so we’re not in a position to recommend specific lenders or products.

      However, on this page you can read more about construction loans and fill out the form to speak with a mortgage broker to discuss your options.

      Kind regards,
      Belinda

  9. Default Gravatar
    PeterSeptember 3, 2014

    Hi. Who lends on commercial/industrial property? Am after wharehousing and office space for my own company, and the for sale offerings are pretty good relative to rental rates.

    • Staff
      ShirleySeptember 5, 2014Staff

      Hi Peter,

      Thanks for your question.

      Unfortunately at this current in point we don’t compare commercial loans. If you’d like, you can get in touch with a commercial mortgage broker, who can help you find the best commercial loan for your situation.

      We also have a business banking section on the site that may be helpful.

      Cheers,
      Shirley

  10. Default Gravatar
    LenJune 15, 2014

    Is there a minimum floor space for a bank loan on an investment property?
    Thanks

    • Staff
      ShirleyJune 16, 2014Staff

      Hi Len,

      Thanks for your question.

      This depends on the home loan, you’ll need to the check with the lender or the Product Disclosure Statement that will list the parameters of the property.

      Cheers,
      Shirley

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