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Interest-only investment loans August 2020

Interest-only investment loans can be a smart tool for property investors. But you have to know what you're doing.


Fact checked

If you’re investing in property, an interest-only investment loan can help you build wealth while minimising costs. If not used correctly it can cost you more in interest repayments.

UBank Home Loan Offer

UBank UHomeLoan - 1 Year Fixed Rate (Investor, IO)

2.44 % p.a.

fixed rate

2.85 % p.a.

comparison rate

UBank Home Loan Offer

Apply for the UBank UHomeLoan - 1 Year Fixed Rate (Investor, IO) and enjoy a home loan with the ability to make extra payments, as well as split facility up to 4 times. You can borrow up to 80% of your home loan value.

  • Interest rate of 2.44% p.a.
  • Comparison rate of 2.85% p.a.
  • Application fee of $395
  • Maximum LVR: 80%
  • Minimum borrowing: $100,000
  • Max borrowing: $2,000,000
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Compare interest-only investment rates

The loans below have interest only repayments. However, the repayment calculation shows principal and interest repayments. Your initial repayments will be lower.

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Applications are subject to approval. Conditions, fees and charges apply. Please note that you need to be an Australian citizen or permanent resident to apply.

Credit services for Aussie Select, Aussie Activate and Aussie Elevate products are provided by AHL Investments Pty Ltd ACN 105 265 861 (“Aussie”) and its appointed credit representatives, Australian Credit Licence 246786. Credit for Aussie Select products is provided by Residential Mortgage Group Pty Ltd ACN 152 378 133, Australian Credit Licence 414133 (“RMG”). RMG is a wholly-owned subsidiary of the Commonwealth Bank of Australia ABN 48 123 123 124 AFSL and Australian Credit Licence 234945. Credit for Aussie Activate products is provided by Pepper Finance Corporation Limited ACN 094 317 647 (“Pepper”). Pepper Group Limited ACN 094 317 665, Australian Credit Licence 286655 acts on behalf of Pepper. Credit services for Aussie Elevate products are provided by AHL Investments Pty Ltd ACN 105 265 861 Australian Credit Licence 246786 (“Aussie”) and its appointed credit representatives. Aussie is a trade mark of AHL Investments Pty Ltd ABN 27 105 265 861. Credit and any applicable offset accounts for Aussie Elevate are issued by Bendigo and Adelaide Bank Limited ABN 11 068 049 178 AFSL / Australian Credit Licence 237879.

Aussie is a trade mark of AHL Investments Pty Ltd. Aussie is a subsidiary of the Commonwealth Bank of Australia ABN 48 123 123 124. ©2020 AHL Investments Pty Ltd ABN 27 105 265 861 Australian Credit Licence 246786.

By submitting this form, you agree to the Aussie privacy policy.

After entering your details a mortgage broker from Aussie will call you. They will discuss your situation and help you find a suitable loan.

  • A comparison of home loans from multiple lenders.
  • Expert guidance through the entire application process.
  • Free suburb and property reports.

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Data indicated here is updated
Loan purpose
Offset account
Loan type
Repayment type
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Name Product Interest Rate (p.a.) Comp Rate^ (p.a.) Application Fee Ongoing Fees Max LVR Monthly Payment Short Description
UBank UHomeLoan - 1 Year Fixed Rate (Investor, IO)
$0 p.a.
Investors can enjoy flexible repayments and an easy application process with this pioneering online lender.
Athena Variable Home Loan - Investor, IO
$0 p.a.
A competitive interest-only investor rate with no application or ongoing fees. Requires a 20% deposit.
ANZ Fixed Rate Home Loan - 3 Year Fixed (Investor, IO)
$10 monthly ($120 p.a.)
Borrow up to 95% LVR and enjoy a 100% offset account with a low ongoing fee.
UBank UHomeLoan - 5 Year Fixed Rate (Investor, IO)
$0 p.a.
Forget about rate rises for 5 years and minimise repayments on your investment mortgage.
ING Orange Advantage Loan - $500k to $1M (LVR <80% Investor, IO)
$299 p.a.
Get a rate discount for higher borrowing amounts, and enjoy a 100% offset account.
ANZ Breakfree Package Home Loan - 3 Year Fixed (Investor, IO)
$395 p.a.
Fix your rate and make interest only payments for 3 years with this investment loan.
UBank UHomeLoan - 3 Year Fixed Rate (Investor, IO)
$0 p.a.
Pay no ongoing fees on this investment loan fixed for 3 years.
ING Mortgage Simplifier Home Loan - $500,000 to $1M (LVR <=80% Investors, IO)
$0 p.a.
Investors can maximise their tax-effectiveness with this interest-only loan.
Aussie Select Basic Fixed Rate Home Loan - 2 Year Fixed Rate (Investor, IO)
$0 p.a.
UBank UHomeLoan Variable Rate - Investor Extra Offer Investor Interest Only
$0 p.a.
Pay interest only repayments with this special offer for investors.

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What is an interest-only investment loan?

An interest-only investment loan is a mortgage that allows you to repay only the interest portion for a set period, usually up to five years.

This means your monthly repayments start smaller. Why? Because you're not repaying the money you've borrowed (the principal). You're just paying the interest on top.

It saves you money in the short term but will cost you more in the long term because you pay more interest over time.

Read this guide to learn more about how interest only repayments work

If used correctly an interest only investor mortgage can help you minimise your tax and repayments. But you need to be aware of the potential downsides too.

To fund your investment property and repay the loan in full you should look at an investor mortgage with principal and interest repayments.

How can property investors take advantage of these loans?

There are several ways investors can use interest-only investment loans to their advantage:

  1. Tax minimisation
  2. Negative gearing
  3. High capital growth strategy

1. Tax minimisation

Investors usually use interest-only loans to reduce their tax bill because home loan interest is tax deductible for investors. At the end of the year you can deduct all the interest charges you’ve paid for your investment property over that year. Payments on the loan principal, meanwhile, aren’t deductible.

If you’re a property investor using an interest-only home loan you’ll be able to deduct your entire home loan repayment from your taxes.

2. Negative gearing

Interest-only investment home loans can be a particularly effective strategy when you account for negative gearing. Negative gearing is a tax concession that allows you to offset any losses you make on your investment property against your personal income. In other words, if you pay more maintaining your investment property and servicing the debt on it than you bring in from rental income, you can deduct this loss from your personal income.

Typically, this strategy is used to minimise losses on an investment property while you wait for the property to appreciate in value. The idea is to eventually sell the property for a capital gain, while minimising the cost of holding the property in the meantime.

3. High capital growth strategy

Some investors buy property with a high-growth strategy by choosing properties and locations they believe will grow quickly in value. Rather than holding the property for many years, renting it out and paying it off over time, these investors buy the property, try to minimise their repayments for a few years, then sell the property for more than they paid. For this strategy to work, an interest-only investment loan is essential because your repayments are much smaller at first.

This can be a risky strategy. It worked well for many investors when property markets were booming. When markets are down it's a different story.

What are the risks of interest-only loans?

Interest-only loans have a few possible drawbacks:

  • With interest-only loans you won’t reduce your debt during the interest-only period. At the end of the interest-only period, you’ll still owe the same amount you borrowed.
  • Your repayments rise significantly once your loan reverts to a principal and interest loan. You need to prepare for this in advance.
  • Going with an interest-only investment loan means you'll end up paying more over the life of your home loan. Since you won’t be reducing the principal on your home loan, it will likely take longer to pay off your mortgage, increasing the interest you pay in the long run.
  • Interest-only home loans can also be risky if your property fails to increase in value. This means when the interest-only period ends, you won’t have equity in your home.

How do I compare interest-only investment loans?

When comparing interest only mortgages for investment, you need to consider these factors:

  • Rate. A lower rate means lower repayments. It's one of the fastest ways to compare mortgages.
  • Offset account. Having an offset account lets you use additional savings to reduce your interest payments even further. Read this guide to learn more about this strategy.
  • Flexibility. A loan with low fees (especially discharge and switching fees) makes it easier to refinance your mortgage when the interest only period ends. And why pay more in fees when you can avoid it?

Use a repayment calculator

Use the calculator below to find out what your repayment will be if you choose an interest-only home loan. Then run the same calculations for principal and interest repayments so you can see what your repayments will be once the interest-only period ends. You’ll need to pay attention to both repayment figures and determine if you’ll be able to service the new repayments once your interest-only period ends.

Need expert help? Contact a mortgage broker

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Important Information*
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Athena Variable Home Loan - Owner Occupier, P&I

Owner-occupiers with 20% deposits can get this competitive variable rate mortgage. $0 application fee and $0 ongoing fees.

Logo for UBank UHomeLoan Variable Rate - Discount Offer for Owner Occupiers, Variable P&I Rate
UBank UHomeLoan Variable Rate - Discount Offer for Owner Occupiers, Variable P&I Rate

Take advantage of a low-fee mortgage with a special interest rate of just 2.49% p.a. and a 2.49% p.a. comparison rate.

Logo for HSBC Home Value Loan - Promotional Offer (Owner Occupier P&I)
HSBC Home Value Loan - Promotional Offer (Owner Occupier P&I)

Get a low interest rate loan with no ongoing fees. Plus you can make extra repayments and free redraw online.

Logo for Suncorp Back to Basics Home Loan - Better Together Special Offer $150k+ LVR<=90% Incl. LMI (Owner Occupier, P&I)
Suncorp Back to Basics Home Loan - Better Together Special Offer $150k+ LVR<=90% Incl. LMI (Owner Occupier, P&I)

Get one free online redraw per month and pay no ongoing fees. Application fees are waived for loans above $150,000. Refinance to an eligible Suncorp loan and get a cashback of $2,000 or $3,000, depending on your loan amount. Other conditions apply.

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