Compare Investor Home Loan Rates From 5.74%

What is an investment home loan?

An investment home loan is designed for people looking to buy a property with the intention of renting it out or profiting through a rise in the property’s value (or both!). Home loans for investment properties differ from home loans used to buy a property to live in, which are known as ‘owner-occupier’ home loans.

Investment home loans often come with higher interest rates than owner-occupier home loans and may have stricter eligibility requirements. Thus, it's arguably more important to thoroughly compare home loan products when looking to finance an investment property.

Borrowing to invest in property is big business in Australia. Nearly $104 billion worth of new loans were handed to property investors over the course of 2023, according to ABS data.

However, it appears most buyers simply turn to one of Australia’s four major banks to fund an investment property purchase. More than 72% of lending for investment properties was provided by the big four banks as of January 2024, APRA data reveals.

But the big banks don’t necessarily offer the best deals. Smaller institutions often offer lower interest rates on investment home loans, as the comparison table above may demonstrate.

By researching and shopping around for the best rates, an investor could save thousands over the life of their loan. 

If you’re considering a new loan for an investment property, or you’re looking to refinance your existing investment home loan, Savings.com.au can help you find some of the market’s lowest-rate investor home loans.

How to get a low-rate investment property loan

It's the question that most readers presumably want answered: How can a property investor secure a lower-rate mortgage product?

As the table below shows, what might be considered a small change in an investor’s home loan interest rate – even just 50 basis points – can have a big impact on their overall returns.

30-Year Investment Home Loan: 6.50% p.a. vs 7.00% p.a.

Calculations made using Savings.com.au's Home Loan Comparison Calculator.

Generally speaking, the lower the risk a borrower poses to a lender, the more favourable the interest rate they can snap up.

In many cases, a property investor can prove they’re financially reliable by maintaining a strong credit score, a stable income, and a low debt-to-income ratio.

They might also reduce the risk they represent to a lender by putting down a larger deposit. Typically, those that put down a deposit of at least 40% of a property’s value can secure some of the most competitive rates on the market.

Additionally, banks and lenders might view an investor buying property in an area with high rental demand, a stable rental market, or one that typically offers above-average rental yields more favourably than they would another investor purchasing in a less desirable location.

Ultimately, however, securing a lower rate investment home loan commonly comes down to shopping around.

By comparing various lenders and mortgage products, and understanding eligibility requirements, a property investor can ensure they find a home loan with all the features they need AND a competitive interest rate.

How to compare investment home loans

At first glance, one home loan may seem indistinguishable from another. Yet, when a would-be borrower looks beyond the catchy slogans and promotional materials, they might discover a single product stands out from the mix.

Proper home loan comparison and a clear understanding of your individual needs is the key to distinguishing between superior and inferior home loan products.

What might be a perfect mortgage for one property investor might be a nightmare loan for another.

Here’s a breakdown of the major factors a prospective investor should consider when shopping for a new home loan:

Interest rates and comparison rates

Perhaps the most obvious factor a would-be borrower should consider is a home loan’s interest rate. A lower rate can lead to significant savings over both the short and long term.

It’s also important to consider whether a fixed or variable rate is more suitable to an individual’s risk tolerance and market expectations.

Finally, mortgage lenders must provide a comparison rate, which factors in both the interest owed on a home loan product and any additional costs or fees charged to a borrower. Comparing one product’s comparison rate against another's can be a surefire way to identify which of the two offers more bang for buck.

Loan features

Loan features like interest-only payments, the ability to make extra repayments, redraw facilities, and offset accounts, can significantly influence the success of a person’s property investment journey.

By understanding what the various features available are, why they matter, and how they can be best utilised, a borrower can compare home loan products confidently and effectively.

Fees and charges

Be aware of all associated fees, such as application fees, ongoing service fees, and early repayment fees.

And don’t forget, some loans might have lower interest rates but higher fees, which could affect the total cost.

Repayment structures

It's important a property investor knows whether a loan offers principal and interest (P&I) repayments, interest-only (IO) repayments, or both.

Many property investors choose to make IO repayments, as they might be aiming to capitalise on the eventual sale of their property and don’t value paying down their debt in the meantime.

On the other hand, another investor might wish to pay off their investment property’s mortgage entirely, so to eventually stop the flow of regular repayments.

Knowing your investment strategy and choosing the mortgage product that suits it best could prove to be an invaluable first step on your property investment journey.

How do investment mortgages differ from owner-occupier home loans?

There are many things that differ between investment and owner-occupier home loans. The key variants include:

Specific interest rates, eligibility requirements, and product features will vary between lenders, with some likely to offer property investors far better deals than others.

Why do investment home loans have higher rates than owner-occupier mortgages?

Investor mortgages generally have higher interest rates than their owner-occupier counterparts, primarily because investment properties are typically considered riskier to lenders.

Investors often rely on rental income to pay some or all of the mortgage repayments related to their investment properties. This income can be considered less stable than other forms of income, as tenant turnover can lead to periods wherein a property is unoccupied.

As of January 2024, the average interest rate for new investor loans was 6.54% p.a., compared to the average new owner-occupier loan rate of 6.27% p.a., according to Reserve Bank of Australia (RBA) data.

For similar risk-related reasons, many banks and lenders require a larger deposit from investors to secure a mortgage. While some lenders may allow an owner-occupier to borrow up to 95% of a home’s value, provided they pay Lenders Mortgage Insurance (LMI), investors may only be able to borrow with a Loan-to-Value Ratio (LVR) of up to 90% and might still face LMI on smaller deposits.

Can investor home loans provide tax benefits?

Considering investing in property and want to reduce your tax bill? You might be interested to learn about negative gearing.

Negative gearing is one of two forms of ‘gearing’; that is, to invest with borrowed money.

The ‘negative’ part comes into play when an investor spends more to own their investment than they make back in resulting income. In the case of property investment, that income is typically rent.

When a property investor pays more in interest and other costs than they receive in rental income, they might be able to offset the difference against their other income when it comes to tax time.

So, investment home loans can, indeed, provide tax benefits to some investors in certain circumstances.