Related Guides in This Series
Whether you’re buying your first investment property or expanding an existing portfolio, understanding how investment property loans work in Australia is essential. This guide covers everything you need to know — from loan types and interest rates to borrowing power, equity strategies, and how to choose the right loan structure for your goals.
What Is an Investment Property Loan?
An investment property loan is a mortgage used to purchase real estate that you intend to rent out or hold for capital growth, rather than live in yourself. While investment loans work similarly to standard home loans, lenders assess them differently because rental income is not guaranteed and they carry a higher perceived risk.
As a result, investment property loans in Australia typically attract slightly higher interest rates than owner-occupier loans — usually 0.3% to 0.6% higher. Understanding this difference is critical when calculating your returns.
Types of Investment Property Loans
Principal and Interest (P&I) Loans
With a principal and interest loan, your repayments cover both the interest charged and a portion of the loan balance. Over time, your debt reduces and you build equity in the property. P&I loans generally attract lower interest rates than interest-only loans and are preferred by lenders, making them easier to refinance.
Interest-Only Loans
Interest-only loans allow you to pay just the interest component for a set period — typically 1 to 5 years. Your repayments are lower during this period, which can improve your cash flow. However, you are not reducing the loan balance, so the total interest paid over the life of the loan is higher. Interest-only investment loans are a popular strategy for investors focused on maximising tax deductions and cash flow. Read our full guide on interest-only loans for investors.
Fixed Rate Loans
A fixed rate loan locks in your interest rate for a set period, usually 1 to 5 years. This provides certainty over your repayments and protects you from rate rises during the fixed term. The trade-off is less flexibility — break costs can apply if you refinance or sell during the fixed period, and you may miss out if rates fall.
Variable Rate Loans
Variable rate loans move with the market. If the RBA cuts the cash rate, your repayments may fall; if rates rise, they go up. Variable loans typically offer more features — offset accounts, redraw facilities, and easier refinancing — and are favoured by investors who want flexibility.
Current Investment Property Loan Rates in Australia
Investment property loan rates in Australia vary significantly between lenders. As of early 2026, variable investment rates from major banks typically start from around 6.0%–6.5% p.a. (comparison rate), while some specialist lenders offer rates below 6.0% p.a. for the right borrower profile.
Investment rates are consistently higher than owner-occupier rates — often by 0.3% to 0.6%. On a $600,000 loan, a 0.5% difference equates to $3,000 per year in additional interest. This is why comparing rates across lenders — with the help of a broker — can make a significant financial difference. See our full breakdown: investment property loan rates vs owner-occupier rates. For current market rates, see our March 2026 rate update.
How Much Can You Borrow for an Investment Property?
Your borrowing power for an investment property depends on several factors:
- Your income — salary, business income, and existing rental income from other properties
- Your expenses — living costs, existing loan repayments, credit card limits
- The rental income — lenders typically use 70–80% of the expected rental income in their serviceability calculations
- Your deposit — most lenders require a minimum 10–20% deposit for investment properties; 20% avoids Lenders Mortgage Insurance (LMI)
- Your credit history — a clean credit file improves both your approval chances and the rate you’re offered
Many investors are surprised to find they can borrow more than they expected — especially when rental income is factored in. A mortgage broker can run a full assessment across multiple lenders to find your true maximum.
Using Equity to Buy an Investment Property
If you already own a home, you may be able to use the equity in your existing property as the deposit for your investment purchase — without needing to save additional cash. This is one of the most powerful strategies available to Australian property investors.
Usable equity is typically calculated as 80% of your property’s current value, minus any outstanding mortgage balance. For example, if your home is worth $900,000 and you owe $400,000, you could have up to $320,000 in usable equity (80% × $900,000 = $720,000 − $400,000 = $320,000).
This equity can be accessed via a refinance, top-up loan, or line of credit. Read our complete guide: how to use equity to buy an investment property.
SMSF Property Loans
Self-managed super funds (SMSFs) can borrow to purchase investment property through a Limited Recourse Borrowing Arrangement (LRBA). This strategy allows you to use your superannuation to invest in residential or commercial property while keeping the asset separate from other SMSF assets.
SMSF property loans are more complex than standard investment loans — they require the property to be held in a bare trust, have stricter lending criteria, and require compliance with superannuation law. Working with a specialist SMSF finance broker is essential.
Family Trust Investment Property Loans
Many sophisticated investors hold investment properties in a family (discretionary) trust structure for asset protection and tax planning flexibility. Trusts can distribute rental income to beneficiaries in lower tax brackets and protect property from personal creditors.
However, lenders treat trust borrowers differently — some lenders don’t lend to trusts at all, and those that do may require personal guarantees from trustees. A broker with experience in trust lending can identify the right lenders and structure for your situation.
Refinancing Your Investment Property Loan
Refinancing an investment property loan can deliver significant savings — either by securing a lower interest rate, unlocking equity for your next purchase, or switching to a loan structure that better suits your current strategy. With investment loan rates varying by 1%+ between lenders, it’s worth reviewing your loan every 2–3 years.
When refinancing, watch for exit fees, break costs on fixed loans, and the impact on your overall portfolio structure.
How a Mortgage Broker Can Help
An investment-focused mortgage broker does more than just find you a loan. A good broker will:
- Compare rates and products across 30+ lenders to find the most competitive option
- Structure your loan to preserve borrowing capacity for future purchases
- Advise on P&I vs interest-only, fixed vs variable, and offset strategies
- Manage the application, valuations, and settlement process end to end
- Help you understand how your investment loan interacts with your tax position
At Tenfold Property Finance, we specialise exclusively in investment property lending. Every client gets a tailored strategy — not just a loan.
Ready to Take the Next Step?
Whether you’re buying your first investment property or refinancing your portfolio, Tenfold Property Finance can help you find the right loan at the right rate. Speak to one of our investment property finance specialists today.