An investment property loan is a mortgage you take out to buy a property you plan to rent out or hold for capital growth. It works like a standard home loan, but the rate is higher, the deposit expectation is larger and the lender looks at your application differently. If you are thinking about building wealth through property, understanding how these loans work is the first step toward a confident purchase.
At Spotto Finance, we compare investment property loans from 30+ lenders to find a structure that fits your cash flow, your tax position and your long-term goals.
What Is an Investment Property Loan and How Does It Differ from a Home Loan?
An investment property loan funds a purchase you will not live in yourself. Lenders treat these loans differently because the borrower is not occupying the property.
- Higher interest rates — typically 15 to 55 basis points above owner-occupier rates at the same lender and LVR.
- Larger deposit expected — most lenders want at least 20 per cent to avoid Lenders Mortgage Insurance (LMI).
- Tighter serviceability assessment — lenders apply a buffer rate (around 3 per cent above the product rate) and shade rental income by 20 to 30 per cent.
- Different tax treatment — loan interest and depreciation may be tax-deductible against rental income.
The Reserve Bank of Australia data shows investor commitments grew 18.8 per cent between March 2025 and March 2026, well above owner-occupier growth of 2.5 per cent.
How Much Deposit Do You Need for an Investment Property?
The size of your investment property loan deposit determines your LVR, the rates available to you and whether you pay LMI. Here is a quick guide.
| Deposit | LVR | LMI Required? | Rate Impact |
|---|---|---|---|
| 20% ($120,000 on a $600,000 property) | 80% | No | Best rate tier at most lenders |
| 15% ($90,000 on a $600,000 property) | 85% | Yes — typically $8,000–$15,000 | Slightly higher rate |
| 10% ($60,000 on a $600,000 property) | 90% | Yes — typically $15,000–$28,000 | Higher rate, fewer lender options |
| 5% ($30,000 on a $600,000 property) | 95% | Yes — limited lenders offer this for investors | Highest rate tier |
A 20 per cent deposit is the cleanest path. It avoids LMI, opens the widest lender choice and locks in a lower rate band.
Can You Buy an Investment Property with Home Equity?
Yes. If your current home has increased in value, you can buy an investment property with a home equity loan or a separate loan split secured against your existing property. Your broker calculates usable equity as 80 per cent of your home's current value minus the outstanding loan balance.
- A home valued at $900,000 with $400,000 owing has $320,000 in usable equity (80% of $900,000 = $720,000, minus $400,000).
- That equity can serve as the deposit and cover purchase costs, sometimes without needing additional cash savings.
- The equity release is set up as a separate split so it does not affect your existing home loan rate.
This strategy is one of the most common ways Australians enter the property investment market without waiting years to save a fresh deposit.
What Are Current Investment Property Loan Rates in Australia?
Investment property loan rates vary by lender, LVR and repayment type. The table below shows illustrative rate bands for a $600,000 loan over 30 years as of late 2026.
| Repayment Type | Rate Range (p.a.) | Monthly Repayment (approx.) |
|---|---|---|
| Principal & Interest, 80% LVR | 6.00%–6.60% | $3,597–$3,838 |
| Interest Only, 80% LVR | 6.30%–6.90% | $3,150–$3,450 |
| Principal & Interest, 90% LVR | 6.40%–7.10% | $3,748–$4,032 |
| Interest Only, 90% LVR | 6.70%–7.40% | $3,350–$3,700 |
Rates shift frequently. A difference of 0.30 per cent on a $600,000 loan adds roughly $40,000 in interest over 30 years, which is why comparing investment loan rates across dozens of lenders matters. An investment property loan calculator gives a starting point, but it cannot account for your full financial picture the way a broker can.
ASIC's MoneySmart mortgage calculator is a useful tool for running initial repayment estimates.
Should You Choose Interest Only or Principal and Interest?
An interest only investment property loan means you pay only the interest for a set period, usually one to five years. After that, the loan reverts to principal and interest repayments at a higher rate.
When interest only may suit you:
- You want to maximise cash flow in the early years.
- You plan to claim the full interest amount as a tax deduction.
- You are paying down a non-deductible owner-occupier loan first.
When principal and interest is stronger:
- You want to build equity from day one.
- You prefer a lower total interest cost over the loan's life.
- You are comfortable with higher monthly repayments now.
Your accountant and broker should work together here.
How Do Lenders Assess Your Investment Loan Application?
Lenders look at more than your income when you apply for a home loan for investment property. Here is what they assess.
- Income and employment — PAYG payslips, tax returns (two years for self-employed) and existing rental income.
- Existing debts — credit cards (full limit, not just the balance), car loans, HECS-HELP and other mortgages.
- Rental yield estimate — a valuer or property manager provides a rental appraisal, shaded by 20 to 30 per cent.
- Serviceability buffer — around 3 per cent above the product rate, so a 6.20 per cent loan is tested at 9.20 per cent.
- Living expenses — the Household Expenditure Measure (HEM) or your declared expenses, whichever is higher.
Getting pre-approval gives you a clear budget and shows sellers you are a serious buyer.
What Tax Benefits Apply to Property Investment Loans?
Property investors in Australia can claim several deductions that reduce taxable income. The key ones are:
- Loan interest — the interest portion of your repayment is deductible against rental income.
- Depreciation — a quantity surveyor prepares a schedule covering the building structure and fittings.
- Property management fees, insurance, council rates and maintenance — deductible in the year incurred.
- Negative gearing — when total costs exceed rental income, the loss offsets your other taxable income.
The 2026 Federal Budget introduced changes to negative gearing rules. Confirm the current position with a qualified accountant before relying on deductions.
For the latest guidance on property deductions, see the Australian Taxation Office rental property guide.
How Does a Broker Help You Find the Best Investment Property Loan Rates?
A mortgage broker in Melbourne compares products from dozens of lenders in a single conversation. At Spotto Finance, Naveen works with 30+ lenders to find the best investment property loan rates in Australia for your situation.
- Rate comparison — we show you the actual rates you qualify for, not headline rates that assume a perfect profile.
- Structuring advice — separate splits, offset accounts and fixed-versus-variable decisions are tailored to your cash flow.
- Paperwork management — we handle the application, follow up with the lender and keep you updated at every stage.
- Ongoing review — after settlement, we check your rate annually and recommend a switch if the market has moved.
In our experience, rate gaps between lenders are often larger than borrowers expect. We've helped a Melbourne couple with two existing properties save $4,200 per year by switching their investment loans to a lender offering a sharper rate at 78 per cent LVR. Their previous lender had quietly lifted its investor margin twice without notifying them.
What Steps Should You Follow to Get an Investment Property Loan?
If you are wondering how to get an investment property loan, follow this sequence.
- Check your borrowing capacity — a broker runs the numbers using your income, debts and existing commitments.
- Save or release your deposit — aim for 20 per cent, or explore equity release from an existing property.
- Get pre-approval — this gives you a firm budget and a 90-day window to find the right property.
- Find the property — research rental yields, vacancy rates and growth forecasts for your target area.
- Submit the full application — your broker lodges the file, orders the valuation and manages lender queries.
- Settlement — your solicitor or conveyancer handles the legal transfer, and your loan draws down on settlement day.
The process typically takes four to eight weeks from pre-approval to settlement.
When Should You Refinance an Investment Property Loan?
Refinancing your investment loan in Australia can save thousands if investment property mortgage rates have dropped since you settled. Consider refinancing when:
- Your fixed rate term is expiring and the revert rate is uncompetitive.
- Your LVR has improved because the property value has grown.
- You want to switch from interest only to principal and interest (or vice versa).
- You need to release equity for a second investment purchase.
A mortgage refinance review takes about 15 minutes with a broker. We compare your current deal against the market and show you the potential saving before you commit to anything.
Frequently Asked Questions
- Answers to the most common questions about investment property loans in Australia.
This article is general information only and does not constitute financial advice. Consult a qualified financial adviser, accountant or mortgage broker before making any borrowing or investment decision. Spotto Finance is authorised through the Finance Brokers Association of Australia (FBAA).
Frequently asked questions
What is an investment property loan?
An investment property loan is a mortgage used to buy a property you intend to rent out or hold for capital growth, rather than live in yourself. Lenders charge higher rates than owner-occupier loans because they consider investment lending a higher risk category.
How much deposit do I need for an investment property loan?
Most lenders require a minimum 20 per cent deposit to avoid Lenders Mortgage Insurance. Some lenders accept 10 to 15 per cent with LMI, and a small number allow 5 per cent deposits on principal and interest repayments. A larger deposit gives you access to lower rates.
Can I use my home equity to buy an investment property?
Yes. If your current home has grown in value, you can refinance or set up a separate loan split to release equity for the deposit on an investment purchase. Your broker calculates usable equity as 80 per cent of your home value minus the outstanding balance.
How do investment property loan rates compare to owner-occupier rates?
Investment rates typically sit 15 to 55 basis points above owner-occupier rates at the same lender, same LVR and same product. The gap varies by lender, so comparing across 30+ lenders often uncovers a competitive rate.
Should I choose interest only or principal and interest for an investment loan?
Interest-only repayments lower your monthly outgoings and may improve cash flow during the early years. However, you are not reducing the loan balance, and interest-only periods typically last one to five years before reverting to principal and interest at a higher rate.
What does negative gearing mean for property investors?
Negative gearing occurs when your rental income is less than your loan interest, property costs and depreciation combined. The net loss can be offset against your other taxable income, reducing your tax bill. The 2026 Federal Budget introduced changes to these rules, so check with your accountant.
How many investment properties can I finance at once?
There is no fixed legal limit. The number depends on your borrowing capacity, rental income from existing properties, serviceability buffers and the lender's own portfolio concentration rules. Some lenders cap exposure at four or five investment loans.
Does rental income count toward my borrowing capacity?
Yes, but lenders typically shade rental income by 20 to 30 per cent to account for vacancy and expenses. If a property earns $500 per week in rent, a lender may count only $350 to $400 when assessing whether you can service the loan.