Finding the right loan for an investment property

Home loans for for investment properties need to consider the nuances of how an investment property works especially around topics such as negative gearing

Best loans for property investors

Investor loans that stand out and offer the most competitive rate are not always easy to find. Interest rates for investors tend to be higher than they are for owner occupiers due to risk – but there are still some great deals out there if you know who to talk to. As a general rule of thumb, rates tend to be structured something like this:

  • Highest rates:Interest-only investor loans
  • Higher rates:Principal and interest investorloans for property investors
  • Lower rates:Interest only loans for owner occupiers
  • Lowest rates:principal and interestloans for owner occupiers When they decide to apply for a home loan, many investors choose an interest only loan as part of a strategy for wealth creation and tax minimisation. These guys are capitalising on the property growing in value over time. Because many investors opt for interest only loans when they buy an investment property, they can take longer to pay off their loan and therefore pose more risk to lenders. Some lenders have begun slashing rates on interest-only investment loans by up to 30 basis points following the Australian Prudential Regulation Authority’s decision to lift its lending cap on property investors, instigated in 2014. The cap required banks to limit growth in lending to housing investors to 10% of their loans, to improve lending standards. With the cap lifted, now could be a good time to get an investor loan.

How do I get the best possible rate on my investment property loan?

Although lenders’ rates are often publicly advertised on bus shelters and the back of cabs, you won’t necessarily get to choose that particular rate. The rate you are eligible for will vary greatly depending on circumstances such as the size of your deposit, your property’s value and where it’s located. As an investor, the interest rate you’ll be offered has much to do with the size of the deposit you have as well as the amount of perceived risk you pose to the lender. Foreign investors tend to pay a higher interest rate and fees, and those with bad credit or a loan to value ratio (LVR) of more than 80%. Investors with an existing property or multiple properties often harvest the equity they have in one property and use it as the deposit for their next property. This is referred to as a line of credit and is a bit like wacking the deposit on your credit card. The equity acts as security for the loan. If you have a stable income and employment history, clean credit history and a substantial deposit – or more than 20% equity in an existing property, you should qualify for a good rate. UNO’s technology scans thousands of rates from more than 20 lenders to find deals you may not have seen elsewhere. Our experienced home loan advisers can then tailor the right solution for you and your situation. Have a chat to uno about the best loan options available to investors.

What is a good interest rate for an investor at the moment?

Home loan rates are influenced by a number of factors, but are generally dictated by the Reserve Bank of Australia’s (RBA) cash rate, which acts like a threshold in the economy. To arrive at a standard variable rate (SVR), a lender will add extra percentage points to the official cash rate, to cover the cost of funding the loan. It also includes a margin so the lender can make a profit. Right now, the cash rate is 1.50% and we’re seeing lenders such as Homeloans Ltd advertise a SVR at 3.64% p.a. (comparison rate 4.03% p.a.*). For investment property loans, Homeloans Ltd is offering a variable rate of 3.89% p.a. (comparison rate 4.27% p.a.*).

What is better: variable, fixed – or split?

A variable interest rate loan is one in which the interest rate charged on your loan amount varies as market rates change. This means your payments on the outstanding balance of your loan may vary month by month, and year by year. Choosing a fixed interest rate means you are locking into the same rate for a period of time, e.g. one year, three years, five years. This means your repayments will always be the same during that time frame – even if the RBA moves the official cash rate up or down. If rates are low, many people will opt to lock into a fixed rate, in order to keep their repayments low in case the interest rate rises. Alternatively, if rates are high and look like they will go down at some point, many people will choose a variable rate so that their repayments drop when the interest rate falls. More experienced property owners will tend to choose a variable rate. It’s potentially more risky if rates go up but can save you a lot of money if rates go down. Another option is to choose a split loan, which enables you to fix part of your loan – rather than the entire thing. This gives you rate stability on part of your loan, should rates go up, as well as flexibility and access to features that may only be offered on a variable rate, such as an offset account or redraw facility (see below). Read: Why you should consider a split loan

What additional features should I be looking out for with my rate?

It’s worth asking your lender about extra features that come with your investment home loan. These could include the option to make extra repayments, the use of a redraw facility and/or an offset account – although these features are usually only available with variable rates, rather than fixed rates, depending on the lender. Redraw facility: A redraw facility enables you to put any money you have saved towards making extra repayments on your home loan. You can withdraw the money at any time, but the benefit of it having been there stays in the loan, because you have been charged less interest during the time it was in your account. There may be fees involved, so it’s worth checking the details with your lender. Offset account: An offset account is like a transaction account which you set up to receive all your income. The bank then offsets the balance in your account against your loan balance and as a result, interest is only calculated on the remaining loan balance. An offset account usually has fees, but some lenders do offer no fee offset home loans. uno’s team of home loan advisers can talk you through which rates have these features attached and help you decide the best option for your circumstances.

What is a comparison rate?

As you may have noticed, a comparison rate is displayed next to a lender’s interest rate in comparison tables. As of 1 July 2003, all lenders by law are required to display a comparison rate next to the advertised interest rate. The comparison rate takes all of the fees – upfront fees, ongoing fees, exit fees – and adds them to the interest rate. This is meant to give you an idea of the ‘true cost’ of the loan. The comparison rate is worked out on a standard $150,000 principal and interest loan on a 25-year loan term. If you are borrowing more than $150,000, be aware that the interest rate will have a greater impact on your situation. After all, the national average loan amount is $400,000, according to the Australian Bureau of statistics, and loan terms vary greatly among borrowers – many are shorter than 25 years, others longer. UNO’s founder and CEO, Vincent Turner, says a good way to compare loans is to calculate the interest portion of a monthly repayment over a certain time frame such as a year or 10 years for each loan, and add costs. A UNO adviser can help too by working out the total cost comparison for your specific circumstances. If you’re borrowing a million dollars, for example, the interest charged is going to be eight times what it would be in the comparison rate scenario. Turner also suggests borrowers undertake an annual review of their loan to see what other rates are out there. Research conducted by UNO found that 40% of Aussie mortgage holders don’t know the interest rate they’re paying on their home loan and could be paying more than they should be. You also shouldn’t expect your lender to give you a gentle nudge if there’s a better rate on the market. “Banks don’t always love you back for blind loyalty and not looking over the fence can have a significant cost,” he says. If you’d like to find out if you could switch to a better rate, speak to a UNO adviser about the refinancing options available and have a play with our refinancing calculator to see how much you could save.

Do foreign investors have access to the same rates?

Typically, the rate for foreign buyers will be somewhat higher than what it is for local investors because there’s more risk involved in verifying someone’s income if they work overseas. But it does depend on the lender. Book in a quick call with our customer care teamThis information is general in nature and you should always seek professional advice when making financial decisions. Book a call in with UNO

Book Call Now

UNO home loans

Need help with your home loan?

UNO Brokers are available night and day for a quick review or your situation and bring expertise that will support better decision making that will save you time and money. Book in a quick call when it suits your busy schedule

Get Started

Related Articles


What our customers are saying

Sally Mackenzie
February 19, 2024
We chose Uno Home Loans from their impressive web site knowing we were going to find it hard, on many fronts, to qualify for a home loan. We were incredibly fortunate to be assigned Mike Parsons as right from the get-go, despite the complexities, he hit the ground running for us. He was incredibly knowledgeable, with years of experience but what was immediately apparent and impressive was that he was totally invested in getting us over the line, doing absolutely everything possible, including working around the clock. Despite it being a relatively small loan in the order of things, Mike never missed a beat, getting docs ready, following up and answering every request from the proposed funder immediately. He kept us informed on progress the minute anything happened, and again if anything needed to be done, he was right on it. In short, we highly recommend Uno, and Mike, knowing what a remarkable job he did, over many weeks, to get us our loan. He got us a great deal, with far better rates than we expected, so we couldn't be happier. In fact, without doubt, you'd be hard pressed to find a more personable, sharp, hard working, dedicated professional who clearly prides himself on getting his customers standout results.
Read more
February 13, 2024
Scott and his team were just A-mazing. We felt supported through the whole process with the greatest quality and care. Every question answered right in time, or even before we asked. The process was smooth and we got the best outcomes we could have wished for.
Read more
Angela Biddle
February 6, 2024
Our mortgage recently came up for renewal, and with interest rates skyrocketing we were looking for ways to minimise the impact. Michael and his team were proactive and attentive. Michael spent time with us to understand our circumstances. He found mortgage options that worked with our current financial situation and longer investment plans. He presented clear options, providing guidance where needed. He and his team were helpful and responsive - streamlining the process and keeping us updated through the negotiations. In the end, Uno did the heavy lifting and secured a significantly better rate than our current bank offered, all with friendly, personal service. We would highly recommend UNO Home Loans.
Read more
Fotis Bikas
January 15, 2024
I cannot help but congratulate Scott Wilkinson of UNO Home Loans for being an absolute credit to both his company and the entire loans industry. Scott is a truly rare gem of a broker in that he will not only go the extra mile to achieve for each customer the very best deal, but his knowledge of all and sundry within the industry is unsurpassed (you will see what I mean if you speak to him). Additionally, Scott has a clear passion for imparting his wealth of information with each customer, whereas the conversation with most other brokers would simply be over if they could not get you the best deal. For me, Scott Wilkinson of UNO Home Loans stands head and shoulders above the competition and I feel privileged to benefit both from his expertise and professionalism whenever it is time for a refinance or new loan.
Read more
Tomoharu Matsui
January 11, 2024
Michael Parsons helped me a lot when it's difficult to establish my capabilities in loan.
Read more
Gillian Kearon
January 9, 2024
I highly recommend Mike Parsons as a mortgage broker. I couldn't fault the service provided by UNO. Thanks Mike!
Read more
Taner T
December 20, 2023
Thank you Eren Tan for the amazing service and support. Our Loan was a little tricky and complex for other lenders but Eren managed to get it over the line in record time. His professionalism and dedication to our needs was exceptional. If you need a Loan no matter how complex your situation, make sure you contact Eren at UNO Home Loans.
Read more
Karaipu Brown
December 20, 2023
Buying & selling a house at the same time is very stressful but Scott Wilkinson from UNO home loans made sure we knew what was happening & took most of the stress away. He always kept us up to date and if we had a concern or wanted clarification on something we were able to call him, if he didn’t know the answer straight away he will find out and contact us back.. now we are enjoying our new house and turning it into a home :)
Read more
Chris Anderson
December 18, 2023
Just completed my first loan with UNO which was so much easier than with other other brokers I have used in the past. Our broker MIKE PARSONS always had time for me and broke things down for me in the simplest of terms and was very patient with my silly questions and my constant changing of plans. I wish I had used them in the past as I wouldn't be in the situation I'm in now. Can't recommend them highly enough. Thanks UNO and Thanks MIKE 😊
Read more
Stephen Broomfield
December 11, 2023
To be able to recommend Scott Wilkinson for your mortgage broker was a privilege. We had deals fall through but Scott supported, guided and stuck with us, proper partnership. The whole team at UNO helped us and supported us right through to after settlement. Made sure everything was correct and how we are progressing. Communication was amazing and straightforward and easy to understand. Transparent. We can not Recommend Scott and the team as Uno high enough. Use UNO with confidence.
Read more
Tarek Hussain
December 6, 2023
Can't thank Amy enough for her hard work, dedication and determination on getting multiple loans completed for me. I wouldn't hesitate in recommending Amy and the Uno team to any of my associates. Will definitely be back in the near future!
Read more
November 3, 2023
If you’re looking for a trustworthy, thorough, reliable & knowledgeable Mortgage Broker then you must call Anita Callaghan! I can’t even imagine how stressful this process would’ve been without her. Anita went above and beyond to make sure she answered every question, responded to every text (even on weekends/after hours), and followed up on every detail to ensure we had all the info we needed. Anita is a true people person who is warm, empathetic, kind and supportive. You can tell she loves helping people and loves what she does, which is probably why she’s so good at it! Can’t thank you enough Anita, or recommend you more highly! You’re the best!
Read more