Compare 5-year fixed investor home loans

A five-year fixed investor home loan is one in which the interest rate you’ll pay on the loan is locked in or ‘fixed’ for a period of five years. Once your rate is locked in, your interest repayments will remain consistent for the entire five-year period, and will not fluctuate, irrespective of how your lender moves interest rates.

Investment home loans can be more expensive than those intended for owner occupiers. If you apply for one, you may find that your lender charges you a slightly higher interest rate and offers you a lower loan-to-value ratio (LVR), meaning you could need a larger deposit. The reason for this is that lenders view investment home loans as riskier than other kinds. Aside from this, fixed home loans for investors are similar to those for owner occupiers.

Potential benefits of fixing your investor home loan, either for five years or for a different period of time, include protection from interest rate rises, a sense of certainty in your repayments, and the potential to pay lower fees. In more detail:

Protection from interest rate rises

If your lender decides to raise interest rates, then being on a fixed rate will mean you are not vulnerable to your interest rate going up, and you will pay the same interest month to month throughout the whole of the five-year period.

A sense of certainty in your repayments

Along with protection from rising interest rates comes the security of knowing that your interest payments will not fluctuate. Knowing you will not pay a higher interest rate over the five years of the loan can give you the ability to plan your budget more easily.

Potentially lower fees

Variable rate home loans often come with features attached, including things such as offset accounts and redraw facilities. While these features can be convenient, they tend to come at an extra cost, and choosing a fixed rate loan without the bells and whistles can mean saving on fees.

Potential downsides of fixing your investor home loan, either for five years or for a different period of time, can include missing out on lower interest rates, potentially paying break fees if you need to exit the loan, missing out on features and being unable to make additional repayments. In detail:

Missing out on possible lower interest rates

While a fixed rate investor home loan will protect you from interest rate rises, locking your rate in can also mean that if your lender decides to lower interest rates, you will not be able to take advantage of this. Before taking one out, it may be worth considering whether interest rates are predicted to rise or fall in years to come. You may like to seek professional financial advice to support you with your financial decision making and planning too.

Potentially paying break fees

If you do decide to end your fixed term loan early for whatever reason, your lender will require you to pay a ‘break cost’ or a ‘break fee’. This is an amount that is charged by lenders to make up for money they might have missed out on, and while there is no set cost, such fees can be expensive.

Explore further: Breaking a fixed-rate home loan: What are break costs?

Lack of features

Offset accounts and redraw facilities, which tend to come with variable rate home loans, can be a useful way to streamline your everyday finances. For example, an offset account functions as an everyday bank account, while also allowing you to pay off your mortgage. You may feel that you are missing out on these features if you have a no-frills fixed rate home loan.

Inability to make additional repayments

Variable rate loans will typically allow you to make additional repayments to pay off your loan more quickly. Fixed rate ones will not, except in occasional circumstances and depending on the lender. Paying off the balance of your home loan more quickly can also mean lowering the interest you pay, and for this reason, you may find a variable rate loan more appealing.

If you’re in the market for an investment property and looking for five-year fixed rate loans, you can start your search by comparing home loans with Canstar, using the table at the top of this page. Each year, Canstar gives out Home Loan Awards to the lenders that offer outstanding value to Aussie home buyers. The winning providers in the Investment Fixed Home Lender Award category may be able to offer you an investor home loan at a competitive rate.

Consider the Target Market Determination (TMD) before making a purchase decision. Contact the product issuer directly for a copy of the TMD.

Generally speaking, you can fix a home loan for any length of time that suits you. You might feel that a shorter period like one, two or three years suits your needs, or if you wish, you could also opt for a longer period like five years. The decision will ultimately be a matter of both personal preference and the length of term that your lender is willing to offer you.

The interest rate you pay on a fixed home loan will be locked in on the day the property settles. It is important to keep this in mind, as interest rates can fluctuate between the time you apply for a home loan product and the date of settlement, so your interest rate could end up being higher than you initially anticipated.

In recognition of this, some lenders will offer you the ability to lock in a guaranteed rate for a fee. If you are concerned about rates changing, it may be worth asking your lender if they are willing to do this for you.

When any fixed home loan comes to an end, it will typically revert to a variable rate. At this point, if there is still a balance to pay off on your home loan, you can remain on a variable rate with your current lender; refinance to a new fixed or split rate with your current lender; or refinance with a new lender for a new fixed, variable or split rate.

When borrowing money to purchase an investment property, it is important to be fully transparent with the lender about the reasons you are applying for the loan. Lying on a home loan application can have serious consequences, and if a lender finds out you are misrepresenting  your intentions for the property, you may be denied a home loan.

Being untruthful on a home loan application can lead to you receiving a black mark on your credit score, and when future lenders see this, they may be reluctant to approve you for a home loan in future, making it more difficult to purchase an investment property.

It is also important to be aware that if you are approved for a home loan and your lender later finds out that you were untruthful, they can make the decision to recall your home loan. This typically means that you’ll be given 30 days to pay the loan off, at which point the property may be sold.