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Choosing the right investment loan

Choosing the right loan to fund your investment is essential to maximise the return you receive. Your Mortgage Choice broker can help you compare hundreds of options.


Get expert advice from your broker

Just as it is important to research the market for the ideal investment property, it makes sense to shop around for a loan that offers competitive rates and fees while still providing the flexibility you need to make the most of your investment.

This is where the expert advice of your local Mortgage Choice broker can be extremely valuable. They can compare hundreds of loans from a wide choice of lenders and advise you on the finer details of each option that could save you money in the long term.

Investment mortgages may come with a slightly higher interest rate, although this will depend on the lender, the area in which you buy and the type of property you select. However, broadly speaking, your investment will be similar to a home loan - you will be required to make repayments based on the loan principal, interest rate and term.

Talk to a Mortgage Choice expert

Loan options of particular interest to investors

Like an owner occupier, you can choose to use a basic or more feature-filled standard variable rate loan to fund an investment property. However there are certain loan options that can offer particular benefits to landlords. 

For tailored advice, speak to your local Mortgage Choice broker, who can suggest the type of loan best suited to your individual situation, goals and budget. 

Many investors choose to fix their mortgage interest rate. With a fixed rate loan, the annual interest charge for each year is known upfront. This means landlords can prepay up to 12 months of interest each year - a cost that may be claimed as a tax deduction.

This can be a way of evening out your tax bill in years when income from other sources (such as wage and salary payments) is higher than normal. The success of this strategy hinges on having sufficient cash to prepay interest, and it’s always sensible to speak with your tax advisor to ensure you can claim the full interest charge as an expense in the current tax year.

Unlike most other loan types, interest only loans involve payments that solely include loan interest - there is no repayment of the principal. The principal is repaid when the property is sold. As some investors aim to make a profit on the sale of the property rather than eventually owning it outright, an interest only loan can be appealing for landlords.

This type of loan offers two key advantages - first, the monthly repayments are usually less than for a principal and interest loan. Secondly, all your repayments are tax deductible as they don’t involve capital repayments of the loan. Most loans permit interest only payments for a limited period, generally up to five years. After this you will need to renegotiate the loan payments with your lender.

A line of credit loan allows borrowers to withdraw cash from their loan up to a certain limit as and when they choose. Each month the loan balance is reduced by the amount of cash coming in and increased by the amount paid for drawings, direct debits or cash withdrawals. There are usually no set repayments, so this loan is best suited to experienced investors with the discipline to manage the loan carefully.

Things can change quickly in the market.

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