Investing in property? You need to find a competitive investment loan to lower your costs and boost your portfolio.
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
Get a discounted, low-fee investor loan from a convenient online lender. 20% deposit required. Refinance to a UBank loan and you could get $1,000 in your USaver account (offer conditions apply).
- Interest rate of 3.99% p.a.
- Comparison rate of 3.99% p.a.
- Application fee of $0
- Maximum LVR: 80%
- Minimum borrowing: $100,000
Compare investment home loans now
Compare investment loan rates
- State Custodians Low Rate Home Loan with Offset - 3.92% p.a. comparison rate.
- ClickLoans The Online Investor Home Loan - 3.88% p.a. comparison rate.
- Tic:Toc Invest Loan Variable Rate Home Loan - 3.8% p.a. comparison rate.
What's on this page?
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 repayment calculator to get a better idea of your repayment costs.
How do investor loans differ from typical home loans?
An investment loan is used to buy an investment property. In other words, you make money from renting out the property or from capital gains as the property rises in value.
Lenders see investment loans as a higher risk than regular owner occupier home loans. Home loans for investment often have stricter lending requirements and borrowing limits, plus higher interest rates. They may also have a higher LVR, requiring the borrower to save up a larger deposit. Read more about how investment loans differ from owner-occupier loans.
The table above contains a wide range of variable and fixed rate investment mortgages, but there are also more specialised loans that might be useful for different types of investors. You can read more about these products on the following pages:
Interest-only investment loans
Learn how to minimise your investment costs with an interest-only loan for investors.
Line of credit equity loan
Use the equity in your home to fund an investment with a line of credit loan.
Using the equity in your home to fund an investment
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.
Calculating the equity in your property
- Your home is valued at $750,000
- You owe $200,000 on the property
- Your equity = $550,000
You can use a line of credit loan to fund the deposit based on your equity, and take out an investment loan to cover the rest. This can help property owners build a portfolio faster.
Your lender needs to be confident that you can repay your investment loan. To maximise your chances of success, be sure to save a good-sized deposit, prepare clear evidence of your income and check your credit score for outstanding debts and liabilities. Get those under control before applying for a loan.
The property you buy also affects your application. Some lenders are reluctant to fund purchases of risky properties, such as very small apartments in suburbs they judge to be oversupplied. You may need to approach a different lender or come up with a bigger deposit.
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. Check out our renovations guides for more information.
- 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
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
- 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.
- Capital gain. When it comes time to sell your property, you may benefit from making a capital gain if the value of your property has risen.
- 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
- Costs. Buying a property can be costly. 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.
- Selling a property takes time. Selling property can take a while. This means if you might need your investment cash on short notice, then property might not be for you. Unlike shares, you can’t sell portions of your investment property.
- Untenanted periods. If you rely on rental income to help pay off your property investment loan, you face the risk of untenanted periods which means that you may suffer financially. This is why it's important to ensure you have a cash buffer.
Frequently asked questions about investment property loans
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