Investment Property Loan Options
Choosing the right loan for your investment property is a critical step in maximising your returns. Each type of loan has its unique advantages, and the best choice depends on your financial goals, cash flow needs, and investment strategy.
As mortgage brokers with expertise in Bondi Junction and Launceston, we’re here to guide you through the most common investment property loan options available in Australia.
Interest-Only Loans
An interest-only loan allows you to pay only the interest portion of your loan for a set period (usually 1–5 years).
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- Best For: Investors prioritising cash flow or planning to sell the property within a few years.
- Key Benefits:
- Lower monthly repayments during the interest-only period.
- Potential to reinvest savings into other opportunities.
Fixed-Rate Loans
A fixed-rate loan locks in your interest rate for a specified period, typically 1–5 years.
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- Best For: Investors who prefer predictable repayments and stability.
- Key Benefits:
- Protects against interest rate hikes.
- Simplifies budgeting with consistent repayments.
Learn more about the pros and cons of fixed-rate loans in our Refinancing Strategies Guide.
Variable-Rate Loans
A variable-rate loan means your interest rate can fluctuate with market changes.
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- Best For: Investors who can handle repayment variability and want flexibility.
- Key Benefits:
- Flexibility to make extra repayments without penalties.
- Ability to switch loans or refinance easily.
Split Loans (Fixed and Variable)
A split loan combines the stability of a fixed-rate loan with the flexibility of a variable-rate loan.
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- Best For: Investors seeking a balance between repayment stability and flexibility.
- Key Benefits:
- Protection from full exposure to rate increases.
- Option to pay down the variable portion faster.
Line of Credit Loans
A line of credit loan allows you to borrow funds against the equity in an existing property.
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- Best For: Experienced investors looking to fund renovations or purchase additional properties.
- Key Benefits:
- Flexible access to funds when needed.
- Interest charged only on the amount used.
Low-Deposit Investment Loans
Some lenders offer low-deposit options for investment properties, often requiring as little as 10% of the property value.
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- Best For: First-time investors with limited upfront capital.
- Key Considerations:
- May require lender’s mortgage insurance (LMI).
- Higher interest rates could apply.
Choosing the Right Loan for Your Goals
When deciding on a loan type, consider:
Your Investment Strategy
Long-term buy-and-hold or short-term fix-and-flip?
Cash Flow Requirements
Do you need lower repayments to manage cash flow?
Market Conditions
Will interest rates likely rise or fall?
FAQs About Investment Property Loans
What is the best loan type for first-time investors?
First-time investors often benefit from interest-only or low-deposit loans to manage initial cash flow. Consult our team for tailored advice.
Can I switch between loan types later?
Yes, refinancing allows you to change your loan type.
What is the maximum loan-to-value ratio (LVR) for investment loans?
Most lenders offer up to 80% LVR, though some may go higher with LMI.
How do I choose between fixed and variable rates?
Fixed rates offer stability, while variable rates provide flexibility. Your choice depends on your financial goals and risk tolerance.
Can I use equity in my home to fund an investment property?
Yes, equity can be accessed through a line of credit or refinancing.
Let Us Help You Find the Right Loan
Choosing the right loan is key to your investment success. Our team of experienced mortgage brokers will help you compare options, negotiate competitive rates, and find a solution tailored to your needs.