An investment property loan is a mortgage used to buy or refinance a property you intend to rent rather than live in. Lenders treat it as a separate category from owner-occupier lending: priced separately, assessed against different income, structured differently. The rate you are quoted is only one part of what the loan costs.
This is for anyone weighing up a first investment purchase or restructuring a portfolio in Melbourne’s west. It covers the mechanics rather than the market, because the mechanics are what you can plan around.
Investor lending is priced as a different risk, not a different product
The security is a property either way. What changes is the purpose, and lenders price purpose.
The split has a traceable origin. APRA applied limits to investor and interest-only lending between 2014 and 2017, and lenders responded by repricing those loans upward. The Reserve Bank’s review of the period found that lenders “chose to reduce the number of these types of loans demanded by increasing their interest rates on these products”. The two categories have been quoted separately ever since.
We do not publish rate figures. Any number printed here dates within weeks and tells you nothing about what a lender will offer on your file. The structure underneath is stable, and that is what the rest of this article covers.
Interest-only lowers the repayment, not the debt
During an interest-only period, as ASIC’s Moneysmart puts it, “you pay nothing off the amount borrowed”. The debt at the end of a five-year interest-only term is the same as the debt at the start. When the period finishes the loan converts to principal and interest, and Moneysmart is blunt: “That means higher repayments.”
There is a second effect that gets missed. A 30-year loan with five years of interest-only at the front has 25 years left to repay the whole principal, not 30. The step-up is sharper than it looks, and it arrives on a date you already know.
Investors use the structure far more than owner-occupiers. The Reserve Bank reported in May 2026 that since 2018, around 40 per cent of new investor lending was interest-only, against 8 to 12 per cent for owner-occupiers.
Interest deductibility and negative gearing are tax questions, not lending questions. They are not ours to answer — take them to your accountant before you choose a repayment structure.
Talk it through before you commit to a structure
Credit Hub is a mortgage broker in Melbourne’s western suburbs: 20+ years of industry experience, 52+ lenders on panel, $1 billion+ in loans settled, 5-star Google reviews. We compare what the panel will do with your file and explain the trade-offs plainly. Outcomes depend on lender assessment.
The serviceability buffer decides what you can actually borrow
Lenders do not assess your application at the rate you will pay. They assess it higher, so the loan still works if rates rise.
APRA sets the floor for that test. In its macroprudential update of 28 May 2026, APRA confirmed that “the mortgage serviceability buffer will remain at 3 percentage points”, and explained that the buffer “helps ensure that recent new borrowers can continue to service their loans in the face of higher expenses and interest rates”. A lender therefore adds at least three percentage points to the product rate before deciding what you can afford.
Three things then shape the answer for an investor.
Every lender sets its own policy on how much of the expected rent it will recognise, and those policies differ between lenders on the same property.
An investment loan is tested on top of the mortgage you already carry, at the buffered rate, not at the rate you are currently paying.
The same APRA update left the debt-to-income settings unchanged. Banks may write up to 20 per cent of new owner-occupied and investment loans at debt-to-income ratios of six times or greater.
Because policies differ, the same file can produce very different borrowing capacities at different lenders. That is the argument for comparing rather than applying once.
LVR sets the deposit, and LMI is the cost of going above it
Loan-to-value ratio is the loan divided by the property’s value. It decides whether lenders mortgage insurance applies.
Moneysmart’s definition is worth reading exactly as written. LMI “protects a credit provider if borrowers are unable to repay their loan”. It is usually charged where “the amount borrowed exceeds 80% of the value of the property”. And, plainly: “LMI does not benefit the borrower, it only protects the lender.” It is normally a one-off cost.
For investors there is a second route to the deposit. Equity in another property can be used as security instead of cash, which is why a refinance of your existing home loan is often the first conversation rather than the last. Our guide to lenders mortgage insurance covers how the cost is worked out.
Offset and redraw are not interchangeable on an investment loan
Both features let you park spare cash against the loan. They do it differently.
An offset account is a transaction account linked to the loan. Money sitting in it reduces the balance the lender charges interest on, while remaining yours to withdraw. A redraw facility works the other way: you make extra repayments into the loan, reducing the balance, and draw them back out later if you need them.
On an owner-occupier loan the practical difference is modest. On an investment loan it is not. Moving money in and out of a loan can change how that debt is characterised for tax purposes, in ways that parking it in a separate account does not. We cannot advise on that, and neither can your lender. Ask your accountant before the loan is set up, not after.
Cross-collateralisation ties your properties to each other
Cross-collateralisation is where one lender holds security over two or more of your properties for the same debt, rather than one property securing one loan.
It can simplify an approval. It also removes choices later. Selling one property, refinancing one loan or moving a property to another lender all become decisions the lender has to agree to, because its security covers the lot. Keep Moneysmart’s warning in front of you: “you could lose your home if the investment turns bad”.
Keeping securities separate costs a little more administration. Whether that is the right trade depends on your holding plan, and it is worth settling before settlement rather than three years in.
Fixed or variable is a trade between certainty and flexibility
A fixed rate, Moneysmart notes, “stays the same for a set period, usually between one and five years”. A variable rate “can go up or down over time”. A split loan fixes part of the balance and leaves the rest variable.
For an investor the deciding factor is usually the holding plan, not a forecast. Fixing buys a known repayment for a known window and costs you flexibility inside it. That includes break costs if you repay early or refinance — ask the lender before you sign. Variable keeps the door open to restructure, at the cost of certainty.
We do not forecast interest rates. The Reserve Bank publishes its current cash rate target and decision history, and lenders publish their own rates; those are the places to check, rather than anyone’s prediction.
Owner-occupier loan versus investment property loan: what actually changes
| What changes | Owner-occupier loan | Investment loan |
|---|---|---|
| How it is priced | Quoted as owner-occupier | Quoted as a separate investor category |
| Repayment structure | Principal and interest is the norm | Interest-only is widely used |
| Income assessed | Your income | Your income plus a portion of expected rent, set by each lender |
| Serviceability test | Product rate plus APRA’s 3 percentage point buffer | Same buffer, applied on top of any existing mortgage |
| LMI trigger | Above 80% LVR | Above 80% LVR |
| Offset and redraw | Largely equivalent in effect | Structurally different — an accountant’s question |
Frequently asked questions
How much deposit do I need for an investment property loan?
Enough to keep the loan at or below 80 per cent of the property’s value if you want to avoid lenders mortgage insurance. Borrow above that and LMI generally applies. Each lender also sets its own minimum deposit policy, so the answer is not the same everywhere.
Are investment property interest rates higher than owner-occupier rates?
Lenders quote them as separate categories, and have done since the APRA measures of 2014 to 2017 prompted repricing. The gap varies by lender and product, so compare current rates directly rather than relying on a figure in an article.
Is interest-only better for an investment property?
It is different, not better. It lowers the repayment now and leaves the debt untouched, which means a larger repayment later over a shorter remaining term. Whether that suits you depends on your cash flow and your tax position — and the second half is a question for your accountant.
Can I use equity in my home instead of a cash deposit?
Often, yes. Equity in an existing property can serve as security for an investment purchase, and using separate loans rather than cross-collateralised security keeps your options open later.
Does the APRA serviceability buffer change how much I can borrow?
Yes. It is why your capacity is lower than a repayment calculator at today’s rate suggests. As at 28 May 2026 the buffer remains at 3 percentage points, and lenders may apply more.
This article is general information only. It does not take into account your objectives, financial situation or needs, and it is not credit, financial or tax advice. Consider whether it is appropriate for you, and seek advice from a qualified professional before acting on it.
Investment lending rewards planning more than timing. The structure you choose at application — repayment type, security arrangement, which features sit on the loan — shapes what the property costs to hold for years afterwards. Most of those choices are far harder to unwind than to get right at the start. Work through them with a broker and your accountant before you sign, not after the first repayment lands.
Talk to a broker about your investment loan
Compare what different lenders will do with your file before you commit to a structure you cannot easily change.
