Looking to purchase or renovate a property for investment purposes?

If you’re looking to invest in real estate, you might consider taking out an investment home loan. Before you apply, it’s a good idea to compare interest rates and calculate the total cost. That way, you can determine whether your investment will deliver a positive return.

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Comparison Rate*
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3.49%

Variable

3.45%

Athena Home Loans

$1.5k

Redraw facility
Offset Account
Borrow up to 80%
Extra Repayments
Interest Only
Owner Occupied

3.53

/ 5
More details

3.59%

Variable

3.49%

Athena Home Loans

$898

Redraw facility
Offset Account
Borrow up to 80%
Extra Repayments
Interest Only
Owner Occupied

3.10

/ 5
More details

3.49%

Variable

3.49%

UBank

$1.5k

Redraw facility
Offset Account
Borrow up to 80%
Extra Repayments
Interest Only
Owner Occupied

3.65

/ 5
More details

3.49%

Fixed - 5 years

3.85%

UBank

$1.5k

Redraw facility
Offset Account
Borrow up to 80%
Extra Repayments
Interest Only
Owner Occupied

3.17

/ 5
More details

4.19%

Fixed - 5 years

5.03%

Heritage Bank

$1.6k

Redraw facility
Offset Account
Borrow up to 90%
Extra Repayments
Interest Only
Owner Occupied

2.85

/ 5
More details

3.67%

Variable

3.72%

Heritage Bank

$1.5k

Redraw facility
Offset Account
Borrow up to 80%
Extra Repayments
Interest Only
Owner Occupied

3.37

/ 5
More details

4.19%

Fixed - 5 years

4.35%

Heritage Bank

$1.6k

Redraw facility
Offset Account
Borrow up to 90%
Extra Repayments
Interest Only
Owner Occupied

2.82

/ 5
More details

3.77%

Variable

4.15%

Heritage Bank

$1.5k

Redraw facility
Offset Account
Borrow up to 80%
Extra Repayments
Interest Only
Owner Occupied

3.41

/ 5
More details

3.69%

Variable

3.83%

Virgin Money

$1.5k

Redraw facility
Offset Account
Borrow up to 80%
Extra Repayments
Interest Only
Owner Occupied

3.52

/ 5
More details

4.47%

Variable

4.66%

Pepper

$1.7k

Redraw facility
Offset Account
Borrow up to 65%
Extra Repayments
Interest Only
Owner Occupied

2.29

/ 5
More details

4.66%

Variable

4.85%

Pepper

$1.7k

Redraw facility
Offset Account
Borrow up to 80%
Extra Repayments
Interest Only
Owner Occupied

2.00

/ 5
More details

3.99%

Fixed - 1 year

4.21%

Heritage Bank

$1.6k

Redraw facility
Offset Account
Borrow up to 90%
Extra Repayments
Interest Only
Owner Occupied

3.33

/ 5
More details

3.79%

Variable

3.79%

Hume Bank

$1.5k

Redraw facility
Offset Account
Borrow up to 85%
Extra Repayments
Interest Only
Owner Occupied

3.27

/ 5
More details

4.70%

Variable

4.72%

Heritage Bank

$1.2k

Redraw facility
Offset Account
Borrow up to 85%
Extra Repayments
Interest Only
Owner Occupied

1.82

/ 5
More details

3.99%

Fixed - 1 year

5.40%

Heritage Bank

$1.6k

Redraw facility
Offset Account
Borrow up to 90%
Extra Repayments
Interest Only
Owner Occupied

1.84

/ 5
More details

3.74%

Fixed - 2 years

3.84%

Virgin Money

$1.5k

Redraw facility
Offset Account
Borrow up to 90%
Extra Repayments
Interest Only
Owner Occupied

3.36

/ 5
More details

3.79%

Variable

3.79%

Hume Bank

$1.5k

Redraw facility
Offset Account
Borrow up to 85%
Extra Repayments
Interest Only
Owner Occupied

3.22

/ 5
More details

3.40%

Variable

3.42%

State Custodians

$1.5k

Redraw facility
Offset Account
Borrow up to 80%
Extra Repayments
Interest Only
Owner Occupied

4.07

/ 5
More details

3.59%

Variable

3.64%

SCU

$1.5k

Redraw facility
Offset Account
Borrow up to 95%
Extra Repayments
Interest Only
Owner Occupied

3.94

/ 5
More details

3.70%

Variable

3.72%

State Custodians

$1.5k

Redraw facility
Offset Account
Borrow up to 90%
Extra Repayments
Interest Only
Owner Occupied

3.60

/ 5
More details

Learn more about home loans

How do you find the best investment home loan rate?

If you’re looking to purchase an investment property, one of the main things you will be looking for is a low interest rate, to ensure you maximise the return on your investment.

There are two types of interest rates used for both owner occupier and investment home loans; fixed and variable rates.

Fixed rate loans have an interest rate that will remain the same for a fixed period, between one and ten years. This type of loan means you can budget for repayments, as they stay the same for the fixed period. If your lender increases their rates, your rate will stay the same. 

If your lender drops their variable rate however, you may end up paying a higher rate than other borrowers.

However, if your lender decides to drop their variable rate, you may end up paying a higher rate than other borrowers.

Variable rate loans have interest rates that can change at the lender’s discretion, usually a response to economic factors and monetary policy. For example when the Reserve Bank of Australia (RBA) changes the cash rate, it is common practice for the banks to drop their standard variable rates. 

Variable investment loan rates can be more difficult to plan for, as the rates can change at any time, and may increase which could hurt your budget. However, if you lender decides to cut their rates, you will also enjoy the benefit of a rate drop.

After you decide whether you a fixed or variable rate is best, you can then start to compare investment home loans based on advertised rates and comparison rates.

Advertised rates show the interest rate that will be charged on the loan, excluding any fees and charges. Comparison rates show the interest rate including most fees and charges, to give the borrower a more complete picture of the cost of the loan. 

TIP:

Comparison rates do not take into account all fees and charges though, so it can often be less complicated to compare loans by considering the advertised rate and then adding in all extra fees and charges.

How does an investment loan differ from an owner occupier loan?

Investment home loans are provided to borrowers who are purchasing property as an investment. That is, they wish to make a profit off the purchase of the property. 

Property investors often rent out investment properties to create another stream of income, or “fix and flip” the property by renovating the home and reselling it for a higher price.

Owner occupier loans, as the name suggests, stipulate that the borrower is purchasing a home to live in, and does not want to make a profit from the purchase of the property.

TIP:

If you take out an owner occupier home loan and decide after moving in, that you want to rent the property out, it is your responsibility to call the lender and refinance to an investment home loan. If you are a loyal customer, you may be able to negotiate a discounted rate, so make sure you speak with a broker before you begin the refinancing process.

Are interest rates higher for investment home loans?

Investment home loans typically have higher interest rates and are more difficult to secure than owner occupier loans. This is partly because in 2014, the Australian Prudential Regulation Authority (APRA) set a 10% cap on new investment loans.

These types of loans may also be seen as riskier to lenders, as the investor will not be living in the house, and may find it easier to default on their repayments if they experience financial difficulty. This is especially true an investor purchases a property, then struggles to find someone to rent it at a price that covers their monthly mortgage repayments.

Why would you choose to take out an investment home loan?

Investing in property is a popular strategy as you can generate wealth through appreciation and building equity. It also allows you to “hedge against inflation” as you will be purchasing an asset that is expected to maintain or increase its value over time. 

Investing in property can also provide a range of tax benefits in Australia that include:

  • Depreciation
  • Negative gearing
  • Capital gains tax exemptions
  • Claiming interest on your mortgage
  • Taking out an interest-free equity loan

Can you get an interest-only investment loan?

Interest only investment loans are more difficult to secure due to tighter lending restrictions outlined by APRA, however some lenders are still offering these types of loans.

These types of loans allow the borrower to pay interest only on their investment loan for a limited time, usually one to five years.

This reduces your monthly repayments substantially, but you are not paying off the principal loan amount, meaning when the interest-only period ends, you still have a large amount outstanding.

What are the benefits of interest only investment loans?

Interest only loans can be beneficial to investors, especially in regard to negative gearing and capital growth.

Capital Growth

If you buy a property as an investment, and pay interest only for the first few years whilst the property increases in value, the capital growth may outweigh the interest you pay.

EXAMPLE:

Let’s say you have a $600,000 property, and it increases by $50,000 over four years. During these four years you paid interest-only repayments on a 3.5% fixed interest rate, a total of $43,853. As you have gained $50,000 in equity, you are essentially $6,147 ahead in repayments, whilst building equity on a principal amount that you have not yet had to pay for.

Negative Gearing

If you are an investor, and you can prove that the interest you pay on your loan is less than your net rental income for the property, you can deduct the difference from your taxable income.

EXAMPLE:

If you buy the $600,000 investment property, with a deposit of $120,000, you will need a $480,000 loan from your lender. You rent the property out at $380 per week ($19,760 per year), whilst paying 3.5% on an interest only investment loan ($10,963 per year). 

To make the property rental ready, you spend $5,000 on renovations and repairs, $2,500 on insurance and $3,000 in strata and property management fees.

In total, including your interest payments, your first year you pay $21,463, yet only receive $19,760 in rent. This means you are negatively geared, and can deduct the $1,703 difference from your taxable income.

Frequently asked questions

What is an interest-only loan? (include how do I work out interest-only loan repayments)

An ‘interest-only’ loan is a loan where the borrower is only required to pay back the interest on the loan. Typically, banks will only let lenders do this for a fixed period of time – often five years – however some lenders will be happy to extend this.

Interest-only loans are popular with investors who aren’t keen on putting a lot of capital into their investment property. It is also a handy feature for people who need to reduce their mortgage repayments for a short period of time while they are travelling overseas, or taking time off to look after a new family member, for example.

While moving on to interest-only will make your monthly repayments cheaper, ultimately, you will end up paying your bank thousands of dollars extra in interest to make up for the time where you weren’t paying off the principal.

Does the Rate Guarantee apply to discounted interest rate offers, such as honeymoon rates?

No. Temporary discounts to home loan interest rates will expire after a limited time, so they aren’t valid for comparing home loans as part of the Rate Guarantee.

However, if your home loan has been discounted from the lender’s standard rate on a permanent basis, you can check if we can find an even lower rate that could apply to you.

What happens to my home loan when interest rates rise?

If you are on a variable rate home loan, every so often your rate will be subject to increases and decreases. Rate changes are determined by your lender, not the Reserve Bank of Australia, however often when the RBA changes the cash rate, a number of banks will follow suit, at least to some extent. You can use RateCity cash rate to check how the latest interest rate change affected your mortgage interest rate.

When your rate rises, you will be required to pay your bank more each month in mortgage repayments. Similarly, if your interest rate is cut, then your monthly repayments will decrease. Your lender will notify you of what your new repayments will be, although you can do the calculations yourself, and compare other home loan rates using our mortgage calculator.

There is no way of conclusively predicting when interest rates will go up or down on home loans so if you prefer a more stable approach consider opting for a fixed rate loan.

What is the difference between fixed, variable and split rates?

Fixed rate

A fixed rate home loan is a loan where the interest rate is set for a certain amount of time, usually between one and 15 years. The advantage of a fixed rate is that you know exactly how much your repayments will be for the duration of the fixed term. There are some disadvantages to fixing that you need to be aware of. Some products won’t let you make extra repayments, or offer tools such as an offset account to help you reduce your interest, while others will charge a significant break fee if you decide to terminate the loan before the fixed period finishes.

Variable rate

A variable rate home loan is one where the interest rate can and will change over the course of your loan. The rate is determined by your lender, not the Reserve Bank of Australia, so while the cash rate might go down, your bank may decide not to follow suit, although they do broadly follow market conditions. One of the upsides of variable rates is that they are typically more flexible than their fixed rate counterparts which means that a lot of these products will let you make extra repayments and offer features such as offset accounts.

Split rates home loans

A split loan lets you fix a portion of your loan, and leave the remainder on a variable rate so you get a bet each way on fixed and variable rates. A split loan is a good option for someone who wants the peace of mind that regular repayments can provide but still wants to retain some of the additional features variable loans typically provide such as an offset account. Of course, with most things in life, split loans are still a trade-off. If the variable rate goes down, for example, the lower interest rates will only apply to the section that you didn’t fix.

What is the best interest rate for a mortgage?

The fastest way to find out what the lowest interest rates on the market are is to use a comparison website.

While a low interest rate is highly preferable, it is not the only factor that will determine whether a particular loan is right for you.

Loans with low interest rates can often include hidden catches, such as high fees or a period of low rates which jumps up after the introductory period has ended.

To work out the best value for money, have a look at a loan’s comparison rate and read the fine print to get across all the fees and charges that you could be theoretically charged over the life of the loan.

What is principal and interest'?

‘Principal and interest’ loans are the most common type of home loans on the market. The principal part of the loan is the initial sum lent to the customer and the interest is the money paid on top of this, at the agreed interest rate, until the end of the loan.

By reducing the principal amount, the total of interest charged will also become smaller until eventually the debt is paid off in full.

How much money can I borrow for a home loan?

Tip: You can use RateCity how much can I borrow calculator to get a quick answer.

How much money you can borrow for a home loan will depend on a number of factors including your employment status, your income (and your partner’s income if you are taking out a joint loan), the size of your deposit, your living expenses and any other debt you might hold, including credit cards. 

A good place to start is to work out how much you can afford to make in monthly repayments, factoring in a buffer of at least 2 – 3 per cent to allow for interest rate rises along the way. You’ll also need to factor in additional costs that come with purchasing a property such as stamp duty, legal fees, building inspections, strata or council fees.

If you are planning on renting the property, you can factor in the expected rental income to help offset the mortgage, but again it’s prudent to add a significant buffer to allow for rental management fees, maintenance costs and short periods of no rental income when tenants move out. It’s also wise to factor in changes in personal circumstances – the typical home loan lasts for around 30 years and a lot can happen between now and then.

How much debt is too much?

A home loan is considered to be too large when the monthly repayments exceed 30 per cent of your pre-tax income. Anything over this threshold is officially known as ‘mortgage stress’ – and for good reason – it can seriously affect your lifestyle and your actual stress levels.

The best way to avoid mortgage stress is by factoring in a sizeable buffer of at least 2 – 3 per cent. If this then tips you over into the mortgage stress category, then it’s likely you’re taking on too much debt.

If you’re wondering if this kind of buffer is really necessary, consider this: historically, the average interest rate is around 7 per cent, so the chances of your 30 year loan spending half of its time above this rate is entirely plausible – and that’s before you’ve even factored in any of life’s emergencies such as the loss of one income or the arrival of a new family member.

How does it work? What are the steps involved?

To check your rate, start by entering your contact details and home loan information at ratecity.com.au. We’ll compare your current home loan to other options in our database, and let you know how much you could save by refinancing.  

If we can’t beat your current rate, you can claim a $100 gift card by confirming your home loan details with us.*

Whether we find you a lower rate or not, all entries will go in the draw to win a chance at $1 million.^

What's the difference between Real Time Ratings and comparison rates?

A comparison rate calculates the cost of a $150,000 loan over 25 years. While a comparison rate is a good industry benchmark, it doesn’t consider your specific lending requirements.

Real Time RatingsTM factors in essential information like your loan size, your loan-to-value ratio (LVR), whether you want an offset account and whether you are an investor or an owner-occupier.

What is a line of credit?

A line of credit, also known as a home equity loan, is a type of mortgage that allows you to borrow money using the equity in your property.

Equity is the value of your property, less any outstanding debt against it. For example, if you have a $500,000 property and a $300,000 mortgage against the property, then you have $200,000 equity. This is the portion of the property that you actually own.

This type of loan is a flexible mortgage that allows you to draw on funds when you need them, similar to a credit card.

What is an ongoing fee?

Ongoing fees are any regular payments charged by your lender in addition to the interest they apply including annual fees, monthly account keeping fees and offset fees. The average annual fee is close to $200 however there are almost 2,000 home loan products that don’t charge an annual fee at all. There’s plenty of extra costs when you’re buying a home, such as conveyancing, stamp duty, moving costs, so the more fees you can avoid on your home loan, the better. While $200 might not seem like much in the grand scheme of things, it adds up to $6,000 over the life of a 30 year loan – money which would be much better off either reinvested into your home loan or in your back pocket for the next rainy day.

Example: Anna is tossing up between two different mortgage products. Both have the same variable interest rate, but one has a monthly account keeping fee of $20. By picking the loan with no fees, and investing an extra $20 a month into her loan, Josie will end up shaving 6 months off her 30 year loan and saving over $9,000* in interest repayments.

How can I get a home loan with no deposit?

Following the Global Financial Crisis, no-deposit loans, as they once used to be known, have largely been removed from the market. Now, if you wish to enter the market with no deposit, you will require a property of your own to secure a loan against or the assistance of a guarantor.

How can I negotiate a better home loan rate?

Negotiating with your bank can seem like a daunting task but if you have been a loyal customer with plenty of equity built up then you hold more power than you think. It’s highly likely your current lender won’t want to let your business go without a fight so if you do your research and find out what other banks are offering new customers you might be able to negotiate a reduction in interest rate, or a reduction in fees with your existing lender.

How often is your data updated?

We work closely with lenders to get updates as quick as possible, with updates made the same day wherever possible.

How does an offset account work?

An offset account functions as a transaction account that is linked to your home loan. The balance of this account is offset daily against the loan amount and reduces the amount of principal that you pay interest on.

By using an offset account it’s possible to reduce the length of your loan and the total amount of interest payed by thousands of dollars. 

Example: If you have a mortgage of $500,000 but holding an offset account with $50,000, you will only pay interest on $450,000 rather then $500,000.

Mortgage Calculator, Repayment Frequency

How often you wish to pay back your lender. 

What is a redraw fee?

Redraw fees are charged by your lender when you want to take money you have already paid into your mortgage back out. Typically, banks will only allow you to take money out of your loan if you have a redraw facility attached to your loan, and the money you are taking out is part of any additional repayments you’ve made. The average redraw fee is around $19 however there are plenty of lenders who include a number of fee-free redraws a year. Tip: Negative-gearers beware – any money redrawn is often treated as new borrowing for tax purposes, so there may be limits on how you can use it if you want to maximise your tax deduction.

Who chooses the winner?

The winner will be chosen randomly from our entries on 21 May 2020 by Loyalty.com.au, in the presence of an independent scrutineer.

How much deposit will I need to buy a house?

A deposit of 20 per cent or more is ideal as it’s typically the amount a lender sees as ‘safe’. Being a safe borrower is a good position to be in as you’ll have a range of lenders to pick from, with some likely to offer up a lower interest rate as a reward. Additionally, a deposit of over 20 per cent usually eliminates the need for lender’s mortgage insurance (LMI) which can add thousands to the cost of buying your home.

While you can get a loan with as little as 5 per cent deposit, it’s definitely not the most advisable way to enter the home loan market. Banks view people with low deposits as ‘high risk’ and often charge higher interest rates as a precaution. The smaller your deposit, the more you’ll also have to pay in LMI as it works on a sliding scale dependent on your deposit size.