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Investment loans versus owner-occupier home loans

If you're buying a house to live in, you need an owner-occupier home loan. If you're a property investor then you need an investment loan, which will have a higher rate.

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This article was fact-checked and reviewed by , a property investment specialist whose book, My four-year-old the property investor, has sold more than 100,000 copies. Content has been updated for 2022.

At a basic level, a home loan is a home loan, regardless of whether you're buying a home or an investment property. You apply, get approved, borrow money and pay it back with interest.

Where these loans differ is the tax benefits of an investment loan, how high the interest rate is and how hard it is to get your application approved.

What are the differences between owner-occupier and investor loans?

Here's a simple run-down of the differences between investor and owner-occupier loans:

  • Lower rates. Owner-occupier loans typically have lower interest rates than investor loans. In February 2022, the lowest variable investor rate in Finder's database was 2.14%. The lowest owner-occupier rate was 1.77%. That's a difference of 37 basis points.
  • Tax benefits. The interest you pay on an investment loan is tax-deductible, as are other costs like mortgage fees. This is because the tax office treats the investment as a business and expenses are tax-deductible. Home owners do not have this benefit with their home loans.
  • Ease of application. While it varies by lender and depends on your circumstances, it's often easier to get an owner-occupier loan than an investment loan. Lenders view owner-occupiers as lower-risk customers. This also depends on the current regulatory environment. A few years ago, regulators limited how many investment loans lenders could have on their books, making the application process tougher.

The importance of a lower rate

Getting a loan with a lower interest rate will always save you money. But if you are investing in property, you are trying to generate income through rent and hopefully a higher capital growth. But it's still worth understanding how a higher rate affects your monthly repayment obligations.

Say you have a $500,000 owner-occupier home loan with a rate of 2.30% over 30 years:

  • Monthly repayment = $1,924
  • Total loan cost over 30 years (including interest) = $692,642

But if this was an otherwise identical investment loan with a higher rate of 2.65%, you'd pay a lot more:

  • Monthly repayment = $2,014
  • Total loan cost over 30 years (including interest) = $725,334

With the higher rate, you'd pay $90 more a month and a total of $32,692 more in interest over 30 years.

To get a better understanding of how a lower interest rate can save you money and how owner-occupier versus investment rates compare over time, check out our lowest rate home loan guide.

When do you need an investment loan?

It sounds obvious but if you are buying an investment property, you need an investment loan. If you are planning to live in the property as your primary place of residence, then you're an owner-occupier.

This can get more complicated if you decide to turn your home into an investment property. When you do this, you need to tell your lender and refinance the loan to an investment loan.

Is it harder to get an investment loan?

In the past, the Australian Prudential Regulation Authority (APRA) introduced various lending restrictions on investor loans. This made it harder to get an investor mortgage.

While lenders are more flexible today, the legacy of these restrictions remains. Some lenders not only charge higher rates for investors, but they also require bigger deposits or lower loan-to-value ratios (LVRs) on investment loans. For example, a lender may offer owner-occupiers a home loan with an LVR of 90% (meaning a 10% deposit is required). But a similar loan for an investor could have an 80% LVR, meaning the borrower needs a larger 20% deposit.

Some lenders are stricter when considering an investor's application. Lender A might take into consideration 100% of the rental income your rental property generates, but lender B might only count 80% of the rental income when assessing whether you can afford the loan.

A brief recent history of investor lending rules

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Cam McLellan is a property investment specialist, the co-founder of OpenCorp and the bestselling author of "My four-year-old the property investor".

What we saw in 2013 – 2017 wasn't unusual, given the market cycle. Sydney's median house price rose 75%, and in 2014 – 2018 Melbourne's median house price rose 59%. What happened next was a test of APRA's power over the market. It showed it could pull its levers to ensure our property markets maintained safe, consistent growth.

By February 2017: APRA was alarmed that 60% of Sydney property purchases were interest-only investment loans. This meant 60% of properties in Australia's most expensive market, at the end of a major growth phase, were being bought by speculators trying to get rich quick. The banks had to slow this down. APRA realised that too many investors were trying to buy at the end of a market growth period (and were potentially about to lose money when a correction occurred). So, they put measures in place to protect investors from buying in an overheated market.

APRA brought the sledgehammer down. It introduced major restrictions on lending to investors, which caused a massive reduction in borrowers who qualified for lending, which led to a slowdown in demand for housing. Sydney and Melbourne median house prices reduced accordingly. This was an expected market correction after the high growth.

By October 2017: APRA had instructed banks to reduce their proportion of interest-only loans to 30% by 31 October. The banks had to move fast to accommodate this, so they introduced massive incentives for borrowers to move from interest-only to principal-and-interest loans.

By December 2018: With the 30% cap achieved, APRA knew its levers had worked. It removed the cap and the market started to loosen. Prices started to rise due to genuine pent-up demand, rather than speculation. APRA had done its job.

From 2019 onwards

These days, there’s a significant gap between owner-occupier home loan rates and investor rates, but APRA has loosened lending restrictions, making it easier for investors to get finance approved. The government and APRA are confident that they have the levers to use when required, they are confident that our financial industry is "unquestionably strong".

How do I find a suitable home loan for me?

Investors and owner-occupiers are looking for the same thing, ultimately: a loan with a competitive interest rate and features that suit their needs. This differs depending on your financial goals and your investment strategy (if you have one).

Here are some tips:

  • Look for a lower rate loan. While investor rates are usually higher, whatever type of loan you need it's always good to find a more competitive deal. Compare home loan rates widely before applying.
  • Fixed or variable. Regardless of the purpose of the loan, you can get a fixed rate or variable rate home loan. Fixed rates mean certainty because your repayments won't change. Variable rates are easier to repay faster and tend to have slightly lower rates.
  • Work out what features you need. The best mortgage feature is an offset account, which lets you save money in the home loan and pay less interest. Investors and owner-occupiers can take advantage of offset accounts.
  • Repayment type. You can either choose to make principal-and-interest repayments or interest-only repayments on your loan. If you make principal-and-interest repayments, you repay the money you've borrowed plus interest together. With an interest-only loan, you don't repay the loan at first. Instead you get smaller repayments (just the interest) for a while, and repay it all later. Investors often use interest-only loans to minimise their short-term costs while maximising their investor tax benefits.

Compare owner-occupier and investor loans in the table below

1 - 20 of 43
$
years
Name Product Interest Rate (p.a.) Comp. Rate p.a. Fees Monthly Payment

Nano Variable Home Loans P&IHome≥ 20% Deposit

Nano Variable Home Loans
2.74%
2.74%
  • App: $0
  • Ongoing: $0 p.a.
$613
Competitive rate with zero fees, fast approval and a 100% free offset account. Available for refinancers and existing buyers purchasing their next home. 20% deposit required.

Yard Variable Home Loan P&IHome≥ 40% Deposit

Yard Variable Home Loan
2.64%
2.66%
  • App: $0
  • Ongoing: $0 p.a.
$605
Get a low variable rate loan with this online lender. 100% offset account. Requires a 40% deposit.

Ubank Neat Variable Home Loan P&IHome≥ 40% Deposit

Ubank Neat Variable Home Loan
2.64%
2.65%
  • App: $0
  • Ongoing: $0 p.a.
$605
Get flexibility and the option to make unlimited extra repayments with this variable rate loan.

loans.com.au Smart Booster Discount Variable Home Loan P&IHome≥ 20% Deposit

loans.com.au Smart Booster Discount Variable Home Loan
2.60%
2.96%
  • App: $0
  • Ongoing: $0 p.a.
$602
Get a low discounted variable rate loan. Requires a 20% deposit. Get your loan processed fast and settle within 30 days.

Unloan Variable Home Loan P&IHome≥ 20% Deposit Refinancers only

Unloan Variable Home Loan
2.64%
2.56%
  • App: $0
  • Ongoing: $0 p.a.
$605
A low-rate variable home loan from a 100% online lender. Backed by the Commonwealth Bank.

IMB Budget Home Loan P&IHome≥ 20% Deposit

IMB Budget Home Loan
2.84%
2.85%
  • App: $449
  • Ongoing: $0 p.a.
$621
A low-rate, no-frills home loan for borrowers with a good deposit and unrestricted repayments. $0 application fee for eligible borrowers with principal-and-interest repayments and deposits of at least 20%.

Greater Bank Great Rate Discount Variable with Family Pledge Home Loan P&IHome≥ -10% Deposit

Greater Bank Great Rate Discount Variable with Family Pledge Home Loan
2.79%
2.80%
  • App: $0
  • Ongoing: $0 p.a.
$617
Pay no deposit or LMI and get a discounted rate with this family pledge loan. Requires a family member to act as guarantor. NSW, QLD and ACT only.

Athena Variable Home Loan P&IHome≥ 40% Deposit

Athena Variable Home  Loan
2.64%
2.64%
  • App: $0
  • Ongoing: $0 p.a.
$605
Owner occupiers with 40% deposits or equity can get this competitive variable rate loan. No upfront or ongoing fees.

homeloans.com.au Low Rate Home Loan with Offset P&IHome≥ 40% Deposit

homeloans.com.au Low Rate Home Loan with Offset
2.64%
2.64%
  • App: $0
  • Ongoing: $0 p.a.
$605
A competitive rate with no application or ongoing fees. This loan is not available for construction.

Macquarie Bank Basic Home Loan P&IHome≥ 40% Deposit

Macquarie Bank Basic Home Loan
2.84%
2.84%
  • App: $0
  • Ongoing: $0 p.a.
$621
This flexible variable rate loan requires a 40% deposit or equity. Get fast online approval and $0 application fee and $0 ongoing fees.

HSBC Home Value Loan P&IHome≥ 30% Deposit

HSBC Home Value Loan
2.77%
2.78%
  • App: $0
  • Ongoing: $0 p.a.
$616
$3,288 refinance cashback offer
This competitive variable rate loan is available for borrowers with 30% deposits. Eligible refinancers borrowing $250,000 or more can get a $3,288 cashback. Terms and conditions apply.

Newcastle Permanent Building Society Real Deal Home Loan P&IHome≥ 20% Deposit

Newcastle Permanent Building Society Real Deal Home Loan
2.87%
2.91%
  • App: $595
  • Ongoing: $0 p.a.
$624
Get up to $3,000 refinance cashback when your LVR is 90% or lower ($2,000 cashback for loan amounts of $250K+ and above, $3,000 for $500K+). Other conditions apply. This variable rate loan requires a 20% deposit and has an offset account.

Yard Variable Home Loan P&IHome≥ 20% Deposit

Yard Variable Home Loan
2.74%
2.76%
  • App: $0
  • Ongoing: $0 p.a.
$613
A competitive variable rate loan for home buyers with an optional offset account ($120 annual fee). 20% deposit required.

loans.com.au Smart Booster Discount Variable Home Loan P&IHome≥ 20% Deposit

loans.com.au Smart Booster Discount Variable Home Loan
2.74%
3.22%
  • App: $0
  • Ongoing: $0 p.a.
$613
Home buyers can get a very low discounted variable rate for the first year. Requires a 20% deposit. Add an offset sub-account for an additional 0.10% on your interest rate. Get your loan processed fast and settle within 30 days.

Unloan Variable Home Loan P&IInvestment≥ 20% Deposit Refinancers only

Unloan Variable Home Loan
2.94%
2.86%
  • App: $0
  • Ongoing: $0 p.a.
$629
Investors can get a low variable rate. Apply online and get fast approval. Backed by the Commonwealth Bank.

Yard Variable Home Loan P&IHome≥ 10% Deposit

Yard Variable Home Loan
3.13%
3.15%
  • App: $0
  • Ongoing: $0 p.a.
$645
This variable rate home loan is available with a 10% deposit. Optional offset account.

loans.com.au Green Home Loan IOHome≥ 10% Deposit

loans.com.au Green Home Loan
2.63%
3.08%
  • App: $0
  • Ongoing: $0 p.a.
$604
Construction loan. This loan is available for borrowers building a home with a NatHERS rating of 7.0 or higher. A competitive variable rate construction loan available to build an energy-efficient home.

Newcastle Permanent Building Society Premium Plus Package Fixed Rate P&IHome 2Y Fixed≥ 20% Deposit

Newcastle Permanent Building Society  Premium Plus Package Fixed Rate
4.29%
4.69%
  • App: $0
  • Ongoing: $395 p.a.
$743
Lock in your rate for 2 years and get package benefits. Requires a 20% deposit. Get up to $3,000 refinance cashback when your LVR is 90% or lower ($2,000 cashback for loan amounts of $250K+ and above, $3,000 for $500K+). Other conditions apply.

Yard Variable Home Loan P&IInvestment≥ 20% Deposit Bundle

Yard Variable Home Loan
2.90%
2.92%
  • App: $0
  • Ongoing: $0 p.a.
$626
This rate is available as part of Yard's investor bundle. Eligible borrowers must have an owner-occupier loan and investor loan with Yard.

Ubank Neat Variable Home Loan P&IHome≥ 20% Deposit

Ubank Neat Variable Home Loan
2.84%
2.86%
  • App: $0
  • Ongoing: $0 p.a.
$621
A competitive variable rate loan that comes with a 100% offset account. 20% deposit required.
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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.

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