Investment home loan rates – grab a cheap ticket to landlord town

How we calculate Home Loan Finder Scores

Read full methodology

What different scores mean

9+

Excellent

These investment home loans offer low costs, coupled with a host of features, giving the best overall value.

7+

Great

These home loans may have slightly higher interest rates or fewer features but overall, a competitive offering.

5+

Standard

Usually the home loans would offer above average rates. They may still include some competitive features.

0+

Basic

Higher costs and/or fewer features.

The best investment loans for July 2024

The average property investor now takes out a loan of $598,677 to fund their investment, according to ABS lending figures. That's a record high.

And while interest rates are still high across the board, several lenders are offering very competitive rates for investors.

Here are 5 of the best investment loans for July, based on their Finder Scores:

• Easy Street Smart Variable Home Loan has a Finder Score of 9.4. It has a 6.04% interest rate for investors (comparison rate 6.09%).
• Police Credit Union Better Home Loan has a Finder Score of 9.2. It has a 6.19% interest rate for investors (comparison rate 6.19%).
• loans.com.au Solar Home Loan has a Finder Score of 9.2. It has a 6.19% interest rate for investors (comparison rate 6.58%).
• Bendigo Bank Express Variable Home Loan has a Finder Score of 9. It has a 6.29% interest rate for investors (comparison rate 6.42%).
• Unloan Variable Home Loan has a Finder Score of 9.1. It has a 6.29% interest rate for investors (comparison rate 6.2%).

Market update by Rebecca Pike – Finder's senior home loans writer

The lowdown on Finder Score

• 9+ Excellent - These investment home loans offer low costs, coupled with a host of features, giving the best overall value.
• 7+ Great - These home loans may have slightly higher interest rates or fewer features but overall, a competitive offering
• 5+ Satisfactory - Usually the home loans would offer above average rates. They may still include some competitive features.
• Less than 5 – Basic - Higher costs and/or fewer features.

Tell me more about the investment home loan score

The Finder Score is an easy, data-driven way to judge home loans at a glance. To create the score, our insights team analyses more than 7,000 home loans across 120+ lenders.

When it comes to scoring investment loans, we only compare the loans in our database which are available for investors. They encompass variable rate loans, fixed rate loans, principal and interest loans, and interest-only loans. We assess the most important features in the loans, rate them, and then combine them via a weighted methodology to create a simple score out of 10.

The Finder Score is designed by our insights and editorial team. We score home loans objectively, Finder's commercial partnerships don't affect the scores at all.

While the Finder Score hopes to help you with your financial decision-making, the right product may be different for your circumstances.

Each home loan is put into a group with other loans of its type. Each product can only be put into 1 of 12 groups and are then compared with other products in that grouping.

• Product groupings

  • Variable Rate Owner Occupier, P&I
  • Variable Rate Owner Occupier, IO
  • Variable Rate Investor, P&I
  • Variable Rate Investor, IO
  • Fixed Rate Owner Occupier, P&I, Short Term
  • Fixed Rate Owner Occupier,P&I, Long Term
  • Fixed Rate Investor, P&I, Short Term
  • Fixed Rate Investor, IO, Long Term
  • Fixed Rate Owner Occupier, Interest Only, Short Term
  • Fixed Rate Owner Occupier,Interest Only, Long Term
  • Fixed Rate Investor,Interest Only, Short Term
  • Fixed Rate Investor, Interest Only, Long Term

The nitty gritty: how Finder Score is calculated

The Finder Score examines the costs and features of each home loan. These are combined to create the final score.

Frequent Flyers Points

Cost Components (85% of overall score)	Features Component (15% of overall score)
Upfront Fees	Extra Repayments and Redraw
Interest costs	Full and Partials Offsets
Monthly/ Annual Fees	Loyalty Discounts
Cashbacks

The cost of the home loan makes up 85% of the score. The other 15% is made up of features that come with the home loan.

• Show the cost component breakdown

  Here's how we weigh each factor in the cost component.

  Cost Components (85% of overall score)	Calculation Methodology
  Interest	Calculated over a $500,000 loan amount and 30 year loan term. The cumulative interest paid is calculated over 5 years, 3 years and 1 year for variable rates, short term fixed rates and long term fixed rates respectively.
  Application Fees	Added to the cost, if applicable
  Settlement Fees	Added to the cost, if applicable
  Ongoing Fees	Calculated over 5 years, 3 years and 1 year for variable rates, short term fixed rates and long term fixed rates respectively.
  Legal Fees	Added to the cost, if applicable
  Valuation Fees	Added to the cost, if applicable
  Cashback	Added to the cost, if applicable
  Frequent Flyer Points	Converted to a dollar value based on ticket prices/redeemable gift cards and deducted from the cost

• Show the features component breakdown

  Here's how we weigh each factor in the features component.

  Features Components	Calculation Methodology
  Offset Account (5% of final score)	Each variant is assigned 10 points if they have a full offset account and 5 points if they have a partial offset account. No points are awarded if the variant does not have this feature.
  Extra Repayments and Redraw (5% of final score)	Each variant is assigned 10 points if they have this feature. No points are assigned if they do not have this feature.
  Loyalty Discounts (5% of final score)	Each variant is assigned 10 points if they have this feature. No points are awarded if they do not have this feature.

What are investment loans?

An investment loan is a loan you can use to purchase an investment property. Investment loans have higher interest rates than owner-occupier loans because lenders view investors as riskier borrowers.

Investment loans: Basic facts

Fixed or variable rates

Investors can choose fixed or variable repayments. Variable rate loans are easier to pay off faster or refinance without an exit fee and are currently lower than fixed rate loans.

But a fixed rate loan lets you lock in an interest rate and forget about rates rising. There's also the option of splitting your loan into fixed and variable portions.

Interest-only repayments

Most owner-occupier borrowers choose principal-and-interest repayments. You borrow money and pay it back, plus interest. Investors can do this too. But they have another option.

Interest-only investment loans start with very low repayments because you're just paying the interest charges. These loans cost you more in the long run. But they let investors maximise their tax-deductible debts in the short term.

Tax deductions

As an investor, most expenses related to owning and maintaining your investment property are tax-deductible.

This includes your loan fees and your loan interest charges. If your investment costs you more than it generates in rent, you can offset the cost by reducing your tax bill.

Investor loans versus owner-occupier loans

How do I compare investment loans?

• Interest rate: A lower interest rate means lower loan repayments.
• Fees: Take a look at fees that might come with the loan. Avoiding fees can make your loan cheaper.
• Loan features: Mortgage features like an offset account can help you build up savings while reducing your interest charges. Offset accounts can be very helpful for investors planning to convert their home into an investment later.
• LVR: Loan to value ratio (LVR) is the amount you can borrow relative to the value of your investment property. If you have a smaller deposit, compare which lenders allow high LVRs. But remember, the smaller your deposit, the more you have to borrow and the higher your costs will be.
• Borrowing capacity: Every lender has different lending criteria. Compare lenders to get an estimate of your borrowing power before deciding on a particular loan or lender.

Costs of a $600,000 investment loan depending on the rate

Here's a simple example of how the interest rate affects your loan repayments each month and the total interest you pay over 30 years.

These calculations don't take loan fees or extra repayments into account and assume that the interest rate doesn't change over 30 years.

How do I apply for an investment property loan?

Lenders treat investment properties as higher-risk purchases, which means it can be more complicated to get an investment loan approved.

Here are 6 tips to make your investment loan application a success:

1. Save a bigger deposit.

A 20% deposit is a big ask, but it makes you a less risky borrower (and lets you save on LMI).

2. Check your credit score.

A quick check of your credit score is always a good idea. Sometimes there are red flags or errors you might not have noticed. If it's not in great shape, it's time to start improving it.

3. Trim your spending.

Cutting back on unnecessary purchases in the 3 months leading up to your application boosts your chances of approval.

4. Compare loans and lenders.

Every lender has different eligibility criteria. Some may be stricter when lending to investors.

5. Choose your property carefully.

If the property you're buying looks like a riskier investment due to its size, property type or location, the lender might reject your application.

6. Talk to a mortgage broker.

A qualified broker can help match you up with a bank or lender whose policies and criteria best suit your personal situation.

My mortgage broker suggested I go on an interest only investment property loan as it would keep down the costs, and the interest can be claimed at tax time.

— Matt Corke, Head of Publishing Ventures

Risks and benefits of investing in property

Property investment can be both risky and rewarding. Here are some of the potential risks and benefits you should think about:

Common wisdom is to opt for an interest-only investment loan so you maximise your tax deductions. And it's a sound approach. The only exception is if you have already paid off the mortgage on your own home. This is not tax-deductible. At that stage, consider going principal and interest and throwing all the money you can at that investment loan to create a debt-free source of income in retirement.

Nicole Pedersen-McKinnon
Freelance finance journalist

How do you build wealth through property investing?

Investing in property allows Australians to build wealth in 2 ways:

1. Rental income each month.
2. Capital gains as the property's value grows over time.

Many investors ideally want to purchase properties that offer a consistent rental income and grow in value over time.

Some investors add value to a property by renovating, extending, or sub-dividing.

A game of finance with some houses

Investors in Australia have a big tax advantage: negative gearing. Even if your investment costs outweigh the rental returns in a financial year, you can use the loss to shrink your tax bill.

"Property investment is a game of finance with some houses thrown in the middle," Metropole Property Strategists founder and CEO Michael Yardney said.

"Strategic investors don't use finance to buy properties, they set up their finance to buy the time to ride the ups and downs of the property cycle so their investment properties can increase in value, giving them the equity and cash flow to buy further properties."

Why you can trust Finder's home loan experts

You pay nothing. Finder is free to use. And you pay the same as going direct. No markups, no hidden fees. Guaranteed.

You save time. We spend 100s of hours researching home loans so you can sort the gold from the junk faster.

You compare more. Our comparison tools bring you cheaper, better home loans from across the market.

Frequently asked questions

• Can I borrow 100% of an investment property's value?

  No. Most borrowers have a 20% deposit, but you can get an investment loan with a 10% deposit. A few lenders offer investment loans with 5% deposits.

• Is it harder to get an investment loan?

  Every home loan is a risk for the lender. And investment properties represent a greater risk. An owner-occupier with no other mortgages is a pretty safe bet. But an investor is speculating on the market. They may have their own mortgage too. An investor needs to cover their own mortgage, find a tenant to pay rent and cover the investment loan repayments.

• What is the average investment loan interest rate?

  As of July 2024, the average variable rate investment loan in Finder's database is 7.50%.

• Which lender has lowest investment loan rate?

  As of July 2024 the lowest investment loan rate is 5.79%.

• How much can you borrow for an investment property?

  In Australia most borrowers, whether homeowners or investors, save a deposit of around 20%. Some lenders are reluctant to lend to an investor unless they have a 20% deposit, but it's definitely possible to buy an investment property with a 10% deposit. You could go lower, but there are fewer loan options if your deposit is 5%.

  When your deposit is under 20% you also need to pay LMI. This can cost you thousands or even tens of thousands, so be sure to factor that in when looking to buy an investment property.

• What does an investment loan comparison rate mean?

  In Australia, all home loans come with 2 rates: the interest rate and the comparison rate. This includes investment loans. The comparison rate is a legal requirement that factors in the cost of fees in addition to interest. All comparison rates are calculated on a hypothetical home loan and don't provide specific details about your own potential costs. While a comparison rate is helpful, you're better off looking at the loan fees in detail for yourself.

• How many investment loans can you have at once?

  There's no limit on how many investment properties you can buy or how many loans you can take out. But you do need to be in a strong financial position to get multiple loans to buy multiple investments.

  If you tried to buy a string of investment properties with 5% deposits, lenders would likely knock you back and your credit score would drop. But if you bought one, paid off a good chunk of it and had steady rental income, you could be in a position to finance a second investment – especially if the value of the first one has risen.

  It's a really good idea to talk to a broker if you're trying to finance multiple properties.

• Should I use an offset account or redraw facility on my investment loan

  Offset accounts and redraw facilities work in a similar way but are structured very differently.

  An offset account is a bank account attached to your investment loan. Any money you've saved there offsets your loan principal (reducing your overall loan term and interest charges). It's your money and you can withdraw at any time.

  A redraw facility lets you withdraw extra repayments you've made on your investment loan. This can be handy in an emergency. Extra repayments also shorten your loan term and reduce your interest charges.

  An offset account gives you more control over your money. But not every investment loan has one.

  If you are planning to convert your current home into an investment property then an offset account offers more tax benefits. It's complicated, but basically if you make extra repayments on your original home loan, this reduces your loan size when it becomes an investment loan. This lowers your tax deductible costs.

• What is positive gearing?

  Positive gearing is the flip side to negative gearing. If you're positively geared, it means the income from your investment property (rent) is greater than the cost of holding it. In other words, you're earning more in rent than you're spending on your investment loan plus maintenance, council rates, insurance and so on. You're making a profit on your investment.

• How often should I review my investment home loan?

  It's worth reviewing your loan's interest rate at least annually. But you should take note of any time your interest rate goes up, as this increases your investing costs.

We put every effort into ensuring information on Finder is accurate. This article was reviewed by John Pidgeon from our Editorial Review Board as part of our fact checking process.

To make sure you get accurate and helpful information, this guide has been edited by Sarah Megginson and reviewed by John Pidgeon, a member of Finder's Editorial Review Board.

Written by

Rebecca Pike

Senior writer

Rebecca Pike is Finder's senior writer for money. She joined Finder after almost four years writing for business publications in the mortgage and finance industry, including three years as editor of Mortgage Professional Australia. She regularly appears as a money expert on programs like Sunrise and Today, as well as across radio and newspapers. She also holds ASIC-recognised certifications in Tier 1 Generic Knowledge and Tier 2 General Advice Deposit Products. See full bio

Rebecca's expertise

Rebecca has written 190 Finder guides across topics including:

• Home loans
• Cost of living
• Budgeting