The top 5 home loan features when investing in property

Top 5 investment home loan features

Your investment could get you a better return with these home loan features.

With a plethora of competing lenders and home loan packages to choose from, selecting your home loan can be a difficult process. That’s why we’ve put together a comprehensive list of ‘must-have’ home loan features that every investor must consider before buying a property.

Observe these five features of home loans and you’ll be on your way to making informed decisions that will help you maximise your returns and reduce your tax liability.

1. Interest only repayments

What are interest-only repayments?

Interest-only repayments require you to repay only the interest portion of your loan, allowing you to pay less each month than a standard principal and interest (P&I) loan. If you’re investing in property, interest only repayments enable you to minimise your mortgage repayments in the short-term, while your property ideally increases in value in the long term.

For example, if you owned a property worth $360 000 with a $300 000 interest only loan at 7%, then your monthly repayments would be $404 per week. If you made principal and interest (P&I) repayments on the same loan, your monthly repayments would rise to $534.

Are there any risks with making interest-only repayments?

Interest-only repayments can be risky because you’re making no progress on your overall mortgage. You should realise that if you’re making interest only repayments, you’re not meeting your overall borrowing commitments, as no principal is being paid.

In the above scenario, after five years, you’ll still owe $300 000 on the property if you take out an interest only loan. However, with a standard P&I mortgage, after five years you have reduced the balance of your loan by $50 000.

However, investors that have good financial management can benefit from the flexibility from interest-only loans because it allows you to make principal repayments even when the loan is interest-only, while still giving them the cash flow benefits of interest only repayments.

Compared interest-only investment loans

2. Low Rate

As the property may be one of your most valuable investments, a low rate loan could help you to pay off your mortgage sooner. However, it is important to realise that low rate home loans have distinct features and benefits compared to other home loan categories.

Features of low rate home loans

  • Less interest: As the name suggests, loans with low interest rates can save you money on repayments.
  • Variable interest: A low rate loan will normally charge a variable rate which means that the rate is susceptible to fluctuation as your lender may raise their standard variable rates.
  • Less features: Lenders can afford to offer low rates because these loans don’t usually have many other features, such as a redraw facility or an offset account.

Why choose a low rate?

  • Lower repayments: A lower interest rate means lower repayments, which is useful if you’re a first time investor or trying to keep costs down. A lower rate also makes it easier to pay more than the minimum repayments.
  • Less impact from official rate rises: Even though most low rate loans have a variable rate, if your interest rate is low to begin with, then it will take longer for rate changes to affect you.
  • Easy to manage: A low rate loan with basic features can be beneficial as you don’t have a range of loan features to consider when making your decision.

3. Offset account

What is an offset account?

An offset account is like a regular transaction account that is added to your mortgage account. You can deposit funds into this account at any time and withdraw them again via ATMs and EFTPOS transactions.

Each dollar kept in this account ‘offsets’ the amount of interest you pay on your mortgage. For instance, if you have a 100% offset account with $10 000 in it and your mortgage balance is $300 000, your interest charges are calculated on the balance of $290 000.

As we mentioned above, reduction in interest can shorten your loan term, as you’ll be able to pay your loan off sooner.

More: Check out our offset home loan calculator to find out how much an offset account could save you

If you link an offset account to your mortgage and arrange to have your salary or any other income you receive paid into it, you can reduce your mortgage balance faster. This is because interest on your loan is calculated daily, so every day you have funds in your offset account will contribute towards reducing the total interest payable.

Are there any risks with offset accounts?

  • Higher interest: Offset accounts are usually offered on full featured home loans that can include higher interest rates.
  • Additional fees: The offset account may have a monthly account-keeping fee.
  • Understand the differences: Ensure you know the difference between a partial offset account and a 100% offset account. A partial offset account will only offset a percentage of the balance in your offer account, not the full amount.

4. No ongoing fee

What is an ongoing fee?

When combined with the right features, home loans with no ongoing fees are a great option for savvy investors. These types of loans reduce the cost of your loan while often providing competitive rates that enable you to manage your repayments more effectively.

Loans with no ongoing fees allow you to pay your costs upfront, such as application fees, without having to worry about having to manage ongoing fees throughout your loan period.

Typically, many lenders will charge ongoing monthly fees to maintain your home loan account or to pay for extra features like 100% offset accounts. Package loans, which bundle your home loan with a credit card and savings account from the same lender also tend to charge ongoing annual fees which cost between $200 - $500.

To compare home loans with no ongoing fees, try to identify what ongoing fees are being omitted. For example, a lender might waive monthly or annual fees, but still charge additional fees for a redraw facility which could impact the overall cost of your loan.

More: Compare home loans with no ongoing fees in the table below by sorting using the table headings.Ongoing fees table

Compared home loans with no ongoing fees

5. No application fee

As the name implies, home loans with no application fees are those which charge $0 application fee. These loans may not have application fees for the following reasons;

  • Promotions: The lender may have waived the application fee to gain new customers for a special promotion.
  • Packaged home loans: Lenders will waive application fees on these types of loans but instead will charge an annual fee.
  • Basic home loans: These loans generally have less features with lower fees.

The application fee is charged by the lender to cover the costs associated with processing your application. This fee can range between $200 to $1000 depending on the provider and type of home loan. Finding loans with no application fees is beneficial because it allows you to set money aside for more important expenses.

Which home loans don’t charge an application fee?

The good news is that there are various types of home loans that don’t include applications fees, including;

  • Full featured home loans: These types of loan offer various features such as offset accounts, and often charge $0 application fees as part of a promotional offer.
  • Packaged home loans: These loans bundle a borrower’s home loan, transaction account and credit card together. This comes with the benefit of netting you interest rate discounts and waivers on fees. Generally, these home loans will charge an annual fee that can range between $150-$500.
  • Basic home loans: Most basic loans will have minimal features and will offset this by offering low fees and interest rates. Generally, the first rate which is discounted or waived for basic loan packages is the application fee.

Compare home loans with no application fees by using the table below.

Compare investment home loans

Rates last updated October 21st, 2018
$
Loan purpose
Offset account
Loan type
Your filter criteria do not match any product
Name Product Interest Rate (p.a.) Comp Rate^ (p.a.) Application Fee Ongoing Fees Max LVR Monthly Payment Short Description
3.89%
4.24%
$0
$0 p.a.
80%
Fix your rate and minimise repayments for 2 years with this interest-only investor mortgage.
3.99%
3.99%
$0
$0 p.a.
80%
Get a discounted, low-fee investor loan from a convenient online lender. 20% deposit required.
3.99%
4.13%
$0
$10 monthly ($120 p.a.)
80%
A competitive variable rate home loan with no application fee.
3.84%
3.91%
$0
$0 p.a.
80%
Get instant online approval and flexible repayment options with this fixed rate mortgage for investing.
4.08%
4.09%
$0
$0 p.a.
90%
Low-fee investor mortgage with a partial offset account. 10% deposit option available.
3.79%
3.82%
$0
$0 p.a.
80%
An essentials variable investor mortgage with a high borrowing amount so you can fund a large purchase.
3.93%
3.94%
$0
$0 p.a.
80%
This investment loan keeps fees low, has a sharp interest rate and comes with a 100% offset account.
3.99%
5.35%
$600
$0 p.a.
90%
Competitive rates for fixed for 3 years with redraw facility.
4.05%
4.22%
$0
$10 monthly ($120 p.a.)
90%
Lock in your interest rate on your investment property for 2 years. For a limited time you can earn double Velocity Frequent Flyer Points.
3.91%
3.92%
$0
$0 p.a.
80%
Investors can go from application to approval in as little as 20 minutes with this innovative online lender.
3.98%
3.98%
$0
$0 p.a.
70%
Investors can get a 100% offset account and a low rate if they have a big deposit. 100% online application process.
4.09%
4.87%
$0
$395 p.a.
90%
Buy your investment property and set your repayments for the first year. Available in QLD, NSW and ACT only.
4.24%
4.00%
$0
$0 p.a.
80%
Buy an investment property and enjoy the certainty of a 3-year fixed rate with interest-only payments.
4.09%
4.40%
$0
$0 p.a.
70%
Forget about rate rises for two years and minimise your investment repayments with this interest only mortgage. Requires a 30% deposit.
4.54%
4.56%
$0
$0 p.a.
80%
An investment loan for new Heritage Bank customers. Low fees and interest-only repayments.
3.97%
3.99%
$0
$0 p.a.
80%
Package your owner occupied loan with investment loan and receive a discounted investment rate. 100% offset account included.
4.09%
5.28%
$0
$395 p.a.
90%
Lock in a competitive investment rate and combine your loan with a credit card and transaction account for extra savings. Package fee applies.
3.99%
4.62%
$395
$0 p.a.
80%
Investors can enjoy flexible repayments and an easy application process with this pioneering online lender.
4.29%
4.31%
$0
$0 p.a.
80%
Investors will pay no application or ongoing fees for this interest-only loan.
4.18%
4.18%
$0
$0 p.a.
80%
Investors get a 100% offset account and pay no application or ongoing fees on this loan from an innovative online lender.
4.90%
4.31%
$0
$0 p.a.
80%
Lock in a fixed rate for 5 years and make interest-only payments with this investment loan.
4.19%
5.49%
$600
$8 monthly ($96 p.a.)
90%
Lock in your investment repayments for 3 years with one of the big 4 banks. Available with a 5% deposit.
4.43%
4.24%
$0
$0 p.a.
90%
Interest-only loan for investment. Available with a 10% deposit and includes a partial offset account.
3.99%
3.99%
$0
$0 p.a.
70%
Investors with a 30% deposit can get this low rate loan to fund their property portfolio.
4.29%
4.31%
$0
$0 p.a.
80%
A simple, variable rate investor loan from an online lender that keeps fees to a minimum.
3.99%
4.62%
$395
$0 p.a.
80%
Investors can enjoy flexible repayments and an easy application process with this pioneering online lender.
4.24%
4.68%
$0
$0 p.a.
90%
Fix your investment repayments for 1 year. You can get this loan with a 10% deposit. Available in QLD, NSW and ACT only.
4.13%
4.14%
$0
$0 p.a.
90%
Access a fee-free offset account and a special interest rate for investors.
4.14%
3.96%
$0
$0 p.a.
80%
Investors can go from application to full approval in as little as 20 minutes with this innovative online lender.
4.18%
4.19%
$0
$0 p.a.
80%
Investors can easily access their equity using BPAY, a debit Master Card or cheque book with this interest-only line of credit.
4.65%
4.69%
$600
$0 p.a.
90%
You can get this variable investment product with a 10% deposit. The loan has limited fees.
4.31%
3.95%
$0
$0 p.a.
80%
A variable interest-only loan for investors. Fast application, low fees, optional offset account. 100% online lender.
4.79%
5.44%
$0
$395 p.a.
90%
Pay off your investment knowing your exact repayments for the first 4 years. Get this loan with a 10% deposit.
4.29%
4.27%
$0
$198 p.a.
70%
Fund your property portfolio with this fixed rate mortgage which includes a 100% offset account. 30% deposit required.
3.94%
3.92%
$0
$0 p.a.
80%
Lock in your interest rate for 2 years and enjoy flexibility, an optional offset account and a fast online application process.

Compare up to 4 providers


As a home loan investor, it is critical that you research, understand and compare the different features of loan packages to uncover the best loan options for you. In doing so, you will benefit from significant cost savings and better financial management.

Image: Shutterstock

Belinda Punshon

Belinda is a journalist here at finder.com.au. Specialising in the home loans and property sections, she is passionate about helping Australians improve their financial wellbeing.

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Important Information*
UBank UHomeLoan Variable Rate - Discount offer for Owner Occupiers, P&I Borrowing over $200,000

Take advantage of a low-fee mortgage with a special interest rate of just 3.59% p.a. and a 3.59% p.a. comparison rate.

loans.com.au Essentials - Variable (Owner Occupier, P&I)

A competitive interest rate home loan with interest only options. Interest rate 3.64% p.a.
comp rate of 3.66% p.a.

Tic:Toc Live in Loan Variable Rate - Principal & Interest

Get a very low interest rate and pay fewer fees. Enjoy a fast online application process and add a 100% offset account for $10 a month.

HSBC Home Value Loan - (Owner Occupier P&I)

Get a low interest rate loan with no ongoing fees. Plus you can make extra repayments and free redraw online. Available with just a 10% deposit.

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