- Owner-occupier home loans are aimed at borrowers who are going to live in the home they are purchasing
- Owner-occupier home loans tend to have lower interest rates and more flexibility than investor loans
- Owner-occupiers are also considered lower risk borrowers than investors
In the Australian home lending market, owner-occupier home loans are for borrowers who will live in the homes they purchase using their properties as security for their loans.
Owner-occupiers account for the lion's share of home lending in Australia, historically fluctuating between roughly two-thirds to three-quarters of total new home lending.
Tipping the balance
In late 2025, new owner-occupier loans dropped to under 60% of all new home lending as investor lending reached record levels. This was fuelled by high rental yields, low vacancy rates, and three cuts to interest rates during 2025.
Banking regulator APRA imposed a cap on riskier investor lending which took effect from February 2026. Interest rates also began climbing again in 2026, which may dampen investor activity.
Why does it matter if you're an owner-occupier?
When you apply for a home loan, you'll need to make it clear to your lender if you're going to be living in the property you're buying.
Lenders regard owner-occupiers as more reliable, lower-risk borrowers and, as such, they are routinely offered lower interest rates than investors.
Why do lenders regard owner-occupiers as lower-risk?
- Less likely to default on repayments compared to investors: Lenders believe owner-occupiers will give higher priority to meeting mortgage repayments rather than risk losing their own homes
- Not as dependent on rental market conditions: Owner-occupiers are not as affected by rental market vagaries - fluctuating rents, vacancy rates, and tenancy issues - which can affect the repayment of investor home loans
- Likely to remain on the lending book for longer: Owner-occupiers tend to stay in their homes for longer periods than investors who are more likely to sell their properties (and exit their loans) if their investment becomes unprofitable or too much trouble
- Don't cost as much: The banking regulator requires lenders to hold more capital to offset investment loans as they are regarded as higher risk. (This is another reason interest rates on investor loans are higher)
Comparing owner-occupier vs investor loans
Owner occupier
As well as offering lower interest rates, owner-occupier loans are generally structured for the long-term, featuring:
- variable or fixed rate options
- typically principal and interest (P&I) repayments to reduce principal over time
- the ability to split the loan
- repayment flexibility (e.g. weekly, fortnightly, or monthly payments )
- redraw facilities or add-on offset accounts
They are also the only loan types permitted for borrowers to qualify for various government schemes, grants, and stamp duty concessions.
Investor
On the other hand, investor loans are specifically tailored for those purchasing an income-generating asset or one that may deliver tax benefits.
As well as having higher interest rates, they more commonly:
- have stricter lending criteria
- requite higher deposit amounts
- allow interest-only (IO) repayments (interest payments on investor loans can be tax deductible)
Here's a quick summation:
| Owner-occupier | Investor | |
| Purpose | To fund primary residence | To fund rental or investment property |
| Interest rates | Typically lower | Typically higher |
| Deposit requirement | Can be as low as 5% | Generally higher (20% plus) |
| Repayment type | Commonly principal & interest (P&I) | More commonly allow interest-only (IO) payments |
| Tax treatment | No deductions | Interest payments tax deductible |
What are lenders looking for?
When you apply for an owner-occupier home loan, lenders will consider your ability to pay back the loan.
This can be dictated by:
- the size of your deposit
- your income
- savings
- other assets
- any existing debts you have
- the property itself
See also : What is home loan serviceability and how is it calculated?
How much deposit?
Often lenders will accept a lower deposit for an owner-occupier home loan than for an investment loan.
The standard deposit is 20% of the property price - or a loan-to-value ratio (LVR) of 80%. A deposit less than 20% usually means you will have to pay Lenders Mortgage Insurance (LMI), though this can depend on the policies of individual lenders.
See also : Which lenders offer low or no-cost LMI?
Some lenders may approve owner occupier loans with deposits as low as 5-10%.
See also: What is a low deposit home loan?
Features of owner-occupier home loans
There may also be a few decisions to make in deciding which loan options are best for you.
Fixed vs Variable interest rates
On most owner-occupier loans, you will need to consider whether you choose a variable or fixed interest rate.
A variable rate home loan is where your interest rate will move (or 'vary') with changes to the market. This means your interest rate can rise or fall over the term of your loan.
A fixed interest rate home loan is a home loan with the option to lock in (or 'fix') your interest rate for a set period of time (usually between one and five years).
Both have their pros and cons and it's important to do your own research or seek financial advice to see what will be best for your circumstances.
Fixed rates can result in considerable interest savings when market interest rates are rising but can lock borrowers into paying higher rates in a falling market.
Principal & Interest vs Interest Only Payments
Another decision that owner-occupiers may have to face is whether to make principal & interest (P&I) or interest only (IO) repayments.
Typically, principal and interest repayments are recommended for owner-occupier home loans, meaning you pay the interest on the loan plus a slice off the principal (the amount borrowed) each time you make a repayment.
This not only leads to a faster reduction of the debt but also quicker accumulation of equity in the property.
Interest-only loans are generally more popular for investment home loans as it is the interest component only on investor loans than can be tax deductible. Interest-only repayments can also help investors manage cash flow and achieve shorter-term financial goals.
It's also worth noting interest-only repayments attract a higher interest rate even though the initial loan repayments may be lower.
How to find a competitive owner-occupier home loan
The market is awash with owner-occupier home loans which are essentially the bread and butter of the home lending market.
As well as finding a competitive interest rate, it's just as important to ensure the loan's terms, conditions, and features match your circumstances and financial goals.
What to look out for
Keep an eye out for fees that may be attached to the loan. The loan's comparison rate will give you some idea of that.
You may also want to find a lender with fast approval times, and if you have alternative streams of income or are self-employed, a loan that allows for this - potentially a low-doc home loan.
A mortgage broker may be able to help you find the best home loan product to fit your needs. Otherwise, you can do your research. Look at our lender reviews for more detailed information.
To get you started with comparing, the table below features some of the most competitive owner-occupier home loans currently on the market:
| Lender | Home Loan | Interest Rate | Comparison Rate* | Monthly Repayment | Repayment type | Rate Type | Offset | Redraw | Ongoing Fees | Upfront Fees | Max LVR | Lump Sum Repayment | Extra Repayments | Split Loan Option | Tags | Features | Link | Compare | Promoted Product | Disclosure |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
5.94% p.a. | 5.98% p.a. | $2,978 | Principal & Interest | Variable | $0 | $530 | 90% |
| Promoted | Disclosure | ||||||||||
5.89% p.a. | 5.80% p.a. | $2,962 | Principal & Interest | Variable | $0 | $0 | 80% |
| Promoted | Disclosure | ||||||||||
5.99% p.a. | 6.02% p.a. | $2,995 | Principal & Interest | Fixed | $0 | $0 | 60% |
| Promoted | Disclosure | ||||||||||
5.93% p.a. | 5.93% p.a. | $2,975 | Principal & Interest | Variable | $0 | $395 | 70% | Disclosure |
Savings.com.au's two cents
There are a multitude of owner-occupier home loans on the market for those purchasing a home to live in. As well as a low interest rate, it's also important to consider the loan's terms and conditions, its features, and any fees that are attached.
If, down the track, you decide to put your home on the rental market, it's important to let your lender know you are no longer an owner-occupier. This will see you needing to switch to an investor loan while the property is rented out. (More on this below.)
As with any home loan, while the standard loan term is generally 30 years, it pays to keep an eye on the home loan market to consider whether it's worth refinancing to another loan with a lower interest rate or better terms, conditions, or features that may suit your changing needs over time. The home loan market is a highly competitive place with ever-evolving products.
What if I want to move out of my owner-occupied home and rent it out?
There are any number of circumstances that could see you move from your owner-occupied property, including relocating for a new job or needing to upsize and deciding to put your home on the rental market.
If you are still paying the mortgage on your home and intend to put tenants in it, you must let your lender know of your changed circumstances.
This will see you to needing to refinance from an owner-occupier loan to an investor loan, which will likely come with a higher interest rate. (However, exemptions could apply if you employ what's called the six-year capital gains tax (CGT) rule.)
Making the change
The good news is it's relatively straightforward to switch from an owner-occupier to an investor home loan.
You can do this through your current lender, but it can also be a good opportunity to shop around for a lower interest rate or better loan terms on the wider market. Many lenders also offer inducements such as cashback offers, discounted interest rates, or add-on loan features to lure refinancers.
What if I don't tell my lender?
Failing to let your lender know you are no longer an owner-occupier of the property could see you charged with occupancy or mortgage fraud down the track. In simple terms, it is illegal not to inform the lender of your changed circumstances.
It's worth noting renting out a room in your home is a different matter - it shouldn't require a change to your loan as long as you remain living there. There may be tax considerations, however.
Do lenders check owner-occupancy?
Every lender will have different policies and procedures for checking whether you are an owner-occupier if they have reason to suspect you are not.
They may investigate whether you live at the property for the majority of the year or that you use the address in official documentation, such as your driver's license, or have the home's utility bills in your name.
They may also consider the proximity of the home from your workplace.
Bear in mind, your lender's assessment of 'owner-occupier' may not be the same as the Australian Taxation Office's definition of principal place of residence (PPOR) for tax purposes.
What happens if you rent out a property with an owner-occupier mortgage?
This involves lying to your lender, or withholding information, and if you're caught, you may face serious consequences.
One will be that the breach will likely be recorded on your credit history, meaning lenders may be wary of extending credit or approving you for a loan in the future.
The worst-case scenario
Depending on the lender, your loan contract, and the extent of the deception, some lenders may move to recall the loan, giving you a deadline to pay off the balance owing or face having the lender repossess the property. You may also face criminal charges for fraud.
As you may have gathered, lenders don't take kindly to being misled. More realistically, however, your lender will probably offer to move your loan to an investment one where you'll likely pay a higher interest rate and applicable internal refinancing fees.
How to switch from an investment to owner-occupier loan?
Of course, the opposite could happen and you may want to move into a property you purchased with an investment loan.
In this case, it can be worth your while telling your lender of your changed circumstances as soon as you've moved in to secure a lower interest rate.
This can be done by keeping the loan you have in place and applying for a 'variation' or 'loan category switch'. You'll have to submit documents showing the property is now your home such as a drivers license with the new address or utilities bills. You'll also need to inform the Tax Office.
Be prepared
Sometimes doing this may trigger your lender to conduct a new loan assessment as part of a complete refinance.
Depending on your repayment type, you may also be required to switch from interest-only repayments to principal and interest repayments.
Many lenders will outline the process of changing loan purposes on their websites.
Frequently Asked Questions
Yes, you will need to tell your lender that you're moving from a home you've purchased with an owner-occupier home loan, particularly if it is going to be a long-term or permanent move.
It's advisable to inform your lender even if you intend the home to remain your primary residence for tax purposes (under the six year rule). Taxation policy and lending policies are not the same.
Yes, you can rent out a room - or rooms - in your home and still qualify as an owner-occupier, provided it remains your primary residence.
There may be tax implications for such arrangements, however.
A person's primary residence is generally exempt from capital gains tax (CGT) when it is sold.
However, the tax is based on how the property is used, not how it was funded. If part of the home was rented out or used for business purposes, the owner may lose part of their capital gains tax exemption.
Yes, owner-occupier loans can be switched to investor loans (or vice-versa) if borrowers' circumstances change.
This can be done through the existing lender via a loan switch application or refinancing the loan to match its new purpose and better suit borrower needs.
It may also be an opportunity to refinance the loan with a different lender that may be offering a better rate or features. Some lenders also offer cashback deals to refinancers.