Everything You Need to Know About Investment Loan Comparison

Comparing Investment Loans Means Comparing More Than Rates

An investment loan comparison isn't about finding the lowest advertised rate. It's about identifying which product structure aligns with your property strategy, your cash flow position, and your plans for portfolio growth. A loan with a slightly higher rate but better offset capability or lower refinance penalties might save you thousands more than a headline rate that comes with restrictive terms.

Consider someone buying a unit in Mawson Lakes while renting in the eastern suburbs. They're salaried, plan to hold the property for five to seven years, then leverage equity into a second purchase. A product with a competitive variable rate, full offset access, and no ongoing fees might cost $150 to $200 more per year in interest than a lender offering a rock-bottom rate with no offset and exit fees that trigger on any refinance within three years. Over a five-year hold, the flexibility to refinance or access equity without penalty is worth far more than the marginal rate difference.

When comparing investment loan options, the decision centres on repayment structure, rate type, offset availability, and how the loan fits within your broader tax and cash flow strategy.

Interest-Only or Principal and Interest: Which Repayment Type Suits Rentvesting

Interest-only loans keep repayments lower during the interest-only period, which preserves cash flow and maximises the deductibility of interest against rental income. Principal and interest loans build equity from day one but reduce the tax-deductible portion of each repayment over time as more of it goes toward principal.

For a South Australian investor buying in Salisbury Downs at current median prices, an interest-only loan might result in monthly repayments around $400 to $500 lower than the equivalent principal and interest loan, depending on the loan amount and rate. That difference can be redirected into an offset account, used to cover holding costs during vacancy periods, or saved toward a deposit on the next property. The trade-off is that at the end of the interest-only period, the loan either reverts to principal and interest at a higher repayment level, or the investor refinances.

Principal and interest suits investors who want to reduce debt over time or who plan to eventually move into the property and convert it to owner-occupied. Interest-only suits those prioritising cash flow, tax efficiency, and the ability to fund further purchases. Most lenders offer interest-only periods of one to five years on investment loans. Longer periods are available but may attract higher rates or require lower loan-to-value ratios under APRA's risk-weighting framework.

Fixed, Variable, or Split: How Rate Structure Affects Your Holding Costs

A variable rate investment loan gives you access to offset accounts, unlimited additional repayments, and the ability to redraw or refinance without break costs. A fixed rate locks in your repayment amount for a set term, typically one to five years, but restricts flexibility. Break costs apply if you refinance, sell, or repay more than the annual limit during the fixed period.

A split loan divides the loan amount between fixed and variable portions. For example, an investor might fix 50 per cent of the loan to lock in a known repayment on half the debt, while keeping the other 50 per cent variable with an offset account attached. This structure provides certainty on part of the loan while preserving flexibility on the rest.

In our experience, rentvesting clients in South Australia often favour variable or split structures because they plan to access equity within three to five years to fund a second purchase. Locking the entire loan on a fixed rate can trigger substantial break costs if rates fall or if the investor needs to refinance early to release equity. Split structures allow investors to manage that risk without giving up rate certainty entirely. More detail on how split loans work in a rentvesting context is available on the split loans for rentvesting page.

Offset Accounts on Investment Loans: Why They're Worth Comparing

Not all lenders offer offset accounts on investment loans, and those that do may charge higher rates or annual fees for the feature. An offset account linked to an investment loan doesn't reduce the interest you're charged for tax purposes, but it does reduce the interest you actually pay, which improves cash flow.

The benefit becomes clearer in practice. Say an investor holds $30,000 in savings and has a $400,000 investment loan at a variable rate. Without an offset, that $30,000 sits in a savings account earning minimal interest, taxed at marginal rates. With an offset, the $30,000 reduces the loan balance on which interest is calculated, saving the investor around $2,000 per year in interest costs at current rates, while the full loan amount remains deductible.

Offset accounts also provide liquidity. Funds in the offset can be withdrawn at any time without needing to apply for a redraw or trigger any loan variation. For investors who want to keep cash available for maintenance costs, holding costs during vacancies, or future deposits, offset access is a structural advantage that justifies a slightly higher rate in most cases. The offset accounts on investment loans page covers the tax and cash flow mechanics in more detail.

Lenders Mortgage Insurance and Loan-to-Value Ratio Settings Across Lenders

Lenders Mortgage Insurance is charged when the loan-to-value ratio exceeds 80 per cent. The premium varies significantly between lenders and is calculated based on the loan amount and LVR. For an investment loan, LMI premiums are generally higher than for owner-occupied loans at the same LVR due to the higher risk weighting applied under APS 112.

As an example, an investor borrowing 90 per cent to purchase a property in Seaford might pay LMI of $15,000 to $25,000 depending on the lender and loan amount. Some lenders cap investment lending at 90 per cent LVR, while others will lend up to 95 per cent with a guarantor or in specific circumstances. LMI is a one-off cost, typically capitalised into the loan, and is not refundable if you refinance.

When comparing lenders, the LMI premium should be factored into the total cost of the loan alongside the interest rate. A lender offering a lower rate but charging a higher LMI premium may end up costing more over the first few years than a lender with a marginally higher rate and lower premium. LMI settings and how they affect deposit requirements are discussed further on the lenders mortgage insurance for investors page.

Rate Discounts and Ongoing Fees: What Determines the Real Cost

Most lenders publish a standard variable rate and then apply a discount based on loan size, LVR, or whether the loan is part of a package. Advertised rates often assume maximum discounts, which may not apply to your scenario. A lender advertising a rate of 6.00 per cent might apply that rate only to loans above $500,000 with an LVR under 70 per cent. At 85 per cent LVR or a smaller loan amount, the actual rate might be 6.30 per cent or higher.

Ongoing fees also vary. Some lenders charge annual package fees of $300 to $400 in exchange for rate discounts and offset access. Others have no ongoing fees but offer fewer features. Monthly account-keeping fees are less common on investment loans but still appear with some non-bank lenders.

When comparing products, the effective rate after fees is what matters. A loan with a 6.10 per cent rate and no annual fee costs less over 12 months than a loan at 5.95 per cent with a $395 annual package fee, assuming the loan amount and other features are equivalent.

Rental Income Assessment and Serviceability Between Lenders

Lenders assess rental income differently when calculating serviceability. Some lenders will use 80 per cent of the expected rental income, others use 70 per cent, and a few will shade it further depending on the property type or location. This shading accounts for vacancy periods, property management fees, and maintenance costs.

For a property in Elizabeth with expected rental income of $400 per week, one lender might assess $320 per week as usable income, while another assesses $280 per week. That $40 per week difference translates to roughly $2,000 per year in assessed income, which can affect borrowing capacity by $30,000 to $40,000 depending on the applicant's other commitments and income.

Some lenders also apply postcode-based shading or exclude certain property types from standard rental income treatment. Units in buildings with high investor concentration, or properties in postcodes with historically high vacancy rates, may attract additional shading or require larger deposits. Rental income assessment methods and how they affect borrowing capacity are covered in detail on the rental income assessment for investment loans page.

New Build Investment Properties and CGT Treatment Under Current Legislation

Investment loans for new build properties carry the same rate and LVR settings as loans for established properties, but the tax treatment differs under legislation that came into effect from the 2027-28 income year. Investors who purchased new builds after 12 May 2026 can continue to deduct losses from the property against all income, including salary and wages, whereas investors who purchased established properties after that date can only deduct losses against other residential property income.

For a South Australian investor buying a house and land package in Munno Para, this distinction affects the after-tax cost of holding the property. If the property is negatively geared by $5,000 per year and the investor's marginal tax rate is 34.5 per cent, the tax refund on a new build is around $1,725 per year. For an established property purchased after 12 May 2026, that loss can only be offset against future property income or capital gains, meaning the investor carries the full $5,000 cost each year until the property is sold or they acquire additional positively geared property income.

New builds also retain access to both the 50 per cent CGT discount and the new indexed cost base method when calculating capital gains from 1 July 2027, giving investors a choice at the time of disposal. Established properties acquired after 12 May 2026 do not have that choice. More on new build structures and tax settings is available on the new build rentvesting page.

Investment Loan Refinancing: When the Product You Have No Longer Fits

Refinancing an investment loan makes sense when the current rate is no longer competitive, when you need to access equity for a second purchase, or when the loan features no longer match your strategy. The decision depends on the difference between your current rate and available rates, the costs involved in refinancing, and whether you're within a fixed rate period.

An investor who fixed their loan two years ago at 5.50 per cent might now find variable rates available at 6.00 per cent or higher, depending on market conditions at the time. In that scenario, refinancing would increase repayments unless the purpose is to access equity or move to a better product structure. Conversely, an investor on a variable rate of 6.80 per cent who has built equity and improved their LVR might refinance to a lender offering 6.20 per cent with offset access, saving $2,400 per year on a $400,000 loan.

Refinancing costs typically include discharge fees from the existing lender, application fees with the new lender, valuation fees, and potentially settlement or legal fees. These costs range from $800 to $1,500 in total. Break costs apply if refinancing out of a fixed rate period and can run into the thousands depending on the remaining term and rate movement. The investment loan refinancing page sets out when refinancing makes sense and how to structure the process.

Call one of our team or book an appointment at a time that works for you. We'll compare loan products across the panel, walk through the rate structures and features that matter for your property type and strategy, and structure the loan to support the next stage of your rentvesting plan.

Frequently Asked Questions