Compare 2-year fixed investor home loans

What is a 2-year fixed investor home loan?

A two-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 two years. This means that, for the entire two-year period, your required repayments will remain the same, irrespective of whether your lender chooses to change the interest rates it charges borrowers with other types of loans. After that point, the loan will generally become variable unless you agree with your lender to ‘roll over’ to another fixed term or you switch to a different home loan.

It is worth keeping in mind that if you are purchasing a property as an investor, your lender might charge you a slightly higher interest rate and offer a lower loan-to-value ratio (LVR) than if you were purchasing a home as an owner-occupier. This is because lenders can view investor home loans as slightly riskier, due to the fact that you may depend on a rental income to pay the mortgage, and a disruption to this could lead to financial difficulties.

In other ways, though, two-year fixed loans for investors are similar to those for owner-occupiers.

What are potential advantages of a 2-year fixed investor home loan?

There can be a number of potential advantages to fixing the home loan rate on your investment property for two years or for a different length of time, including:

• A sense of certainty from knowing that your interest rate will remain the same from month to month, regardless of whether your lender decides to move variable investment home loan rates.
• Being protected from interest rate rises, if your lender decides to raise their rates within the two-year period of your loan.
• Potentially saving money on fees and charges, as fixed loans typically do not come with features like offset accounts and redraw facilities, so you will not need to pay associated costs.

What are potential drawbacks of a 2-year fixed investor home loan?

Whether you choose to fix the loan rate for your investment property for two years or a different period of time, there are a number of things to be wary of, including:

• If your lender lowers its interest rates, you will not be able to take advantage, as your investment home loan rate will be locked in.
• You may be charged break fees if you decide to end your loan early, whether it’s because you’re refinancing or for another reason.
• You typically will not have access to features like offset accounts and redraw facilities, which can help streamline your everyday finances.
• You generally cannot make additional repayments on a fixed rate loan without incurring a penalty (although some lenders may allow this up to a limit).

Can you break a 2-year fixed home loan?

If you want to sell your property, remortgage, or otherwise break out of your fixed home loan, it is generally possible to do so, but it will depend on the terms and conditions of the loan, and you may also be charged a ‘break cost’ or a ‘break fee’. Lenders charge these to compensate for the money that they could lose if you break out of a loan early.

Break fees will vary in cost. A lender may consider factors such as the interest rate you locked in for your loan (compared with the current interest rate), how much time remains on your fixed-rate term, and the amount of money you originally borrowed.

How do you compare 2-year fixed rate investor home loans?

If you’re in the market for an investment property and wondering about the available two-year fixed rate loans, you can start your search by comparing home loans with Canstar, using the table at the top of this page. You can compare two-year investment home loans based on their interest rates, fees and the features on offer. You can also compare products based on a combination of these factors using Canstar’s Star Ratings.

Each month, Canstar updates its Home Loan Star Ratings based on expert analysis of the loans on our database. Loans are assessed based on a combination of cost (rates and fees) and features.

Before making a purchase decision, consider the Target Market Determination (TMD) and the Key Facts Sheet for the home loan. Contact the product issuer directly for a copy of these documents.

How long can you fix a home loan for?

There is no set time that you are required to lock in a home loan for. You may choose to lock a fixed rate in for a relatively short period like one or two years, or for a longer time, like five years. The length of time you choose will come down to your personal preferences, needs and circumstances, and you will need to agree on it with your lender.

How do you lock in a low-interest rate?

When you take out a fixed home loan for your investment property, the interest rate you pay will be locked in on the day that the loan settles. It is important to be aware of this, as this rate could be different than on the date when you applied for the loan product.

If you are concerned about rates changing between the application date and settlement date, your lender may offer you the option of locking in a guaranteed rate prior to settlement, although you will usually be required to pay a fee for this.

What happens at the end of a fixed investor home loan term?

When any fixed home loan comes to an end, whether you locked your rate in for two years, shorter or longer, it’s typically the case that you will revert to a variable rate home loan afterwards. At this point, if there is still a balance to pay on your home loan, you either have the option to:

• remain on a variable rate with your current lender,
• refinance to a new split or fixed rate with your current lender, or
• refinance to a new split, fixed or variable rate with a new lender.

How much deposit do you need for an investment property loan?

Generally speaking, most lenders will require you to have saved a deposit of at least 20% of the purchase price of whichever property you wish to buy. Lenders may still be willing to offer you a home loan if you have less than this amount saved for a deposit, but they may ask you to pay lenders mortgage insurance (LMI), which is an insurance policy intended to protect lenders in the event that a borrower defaults on their home loan repayments.

Can you unlock equity to invest in property?

It may be possible to use the equity you have in an existing property to fund some or all of the deposit price if you wish to purchase a new one. Home equity is the difference between the value of your home and how much you still have left to pay on your mortgage, and if you have owned your own home for a while and have paid off a chunk of the mortgage, you may find you have a reasonable amount of equity in the property.

What happens if you lie on your investor home loan application?

When borrowing money to purchase an investment property, it is important to be truthful about the reasons you are applying for the loan. Lying on a home loan application can have serious consequences. If your lender discovers that you have applied for an owner occupier loan but actually plan to rent the property out, it is likely to reject your application. It is likely you will also receive a black mark on your credit score, which could make other institutions hesitant to lend to you in future.

If a lender finds out that you lied on your application after it is approved, it may have the right to recall your home loan. In this situation, the lender may give you a 30-day period to pay off the balance of the loan, after which the property will be sold off.

Home loan glossary of terms

Please note that these are a general explanation of the meaning of terms used in relation to home loans or mortgages.

The wording of loan terms and conditions may use different phrases or terms, and you should read the terms and conditions of the relevant loan to understand the features and cost of that loan. You cannot rely on these terms to be part of any loan you may take out.

Refer to the lender’s Key Facts Sheet and other applicable product documentation, and see Canstar’s Financial Services and Credit Guide (FSCG).

Refer to the product disclosure statement (PDS) and Canstar’s Financial Services and Credit Guide (FSCG).

• Annual percentage rate (APR): This is the total charge for the loan including fees and interest expressed as a percentage, which allows you to compare across the market.
• Comparison rate: An interest rate figure that represents the total annual cost of the loan, including the annual interest rate, monthly repayments, and most ongoing and upfront fees and charges. Under the law and on the Canstar website, all comparison rates for home loans are based on a $150,000 loan over 25 years (read the comparison rate warning). Learn about comparison rates.
• Credit rating (credit score): An assessment (typically performed by specialised credit bureaus) of the creditworthiness of individual borrowers, based on their borrowing and repayment history (credit report). Lenders consider your credit rating when deciding whether or not to give you a loan, how much to loan you, and what interest rate you will pay. You can check your credit score for free with Canstar.
• Deposit: In the context of home loans, a deposit is a percentage of the purchase price or property value that you will typically need to save and pay upfront. Find out more about home loan deposits and how they work.
• Debt-to-income ratio: A comparison that takes in the amount of debt you have relative to your overall income. Lenders may use this calculation as a way to measure your potential eligibility for a loan. Learn about debt-to-income ratio.
• First Home Loan Deposit Scheme (FHLDS): The First Home Loan Deposit Scheme, now known as the First Home Guarantee Scheme, is a government initiative designed to help Australians buy their first home. The scheme is a government guarantee which will secure the mortgages of some low- and middle-income earners with a deposit of as little as 5% of a property’s value, and help them avoid paying Lenders Mortgage Insurance premiums. Eligible first home buyers could purchase a variety of residential properties under the scheme, including an existing house, townhouse or apartment; a house and land package; land together with a separate contract to build a home; and an off-the-plan apartment or townhouse. However, not all lenders are involved in this scheme.
• First Home Owner Grant (FHOG): A government grant given to first home buyers. Learn what first home owner grants are available in your state or territory.
• Fixed rate: A fixed rate home loan allows a borrower to lock in an interest rate for a particular period of time, typically from 1 year up to 5 years. The interest rate that the borrower pays will remain the same for that amount of time, regardless of changes in the RBA cash rate and other economic factors.
• Guarantor: If someone ‘goes guarantor’ on your loan, it means that they are promising (‘guaranteeing’) that they will be liable for the loan if repayments are not made. The guarantor also means they must be able to demonstrate their own capacity to repay your loan. Learn about guarantors on home loans.
• Introductory rate or honeymoon rate: An introductory rate offered to entice borrowers with a low advertised rate for the first few months of the loan. After the honeymoon period, the loan reverts to the standard variable rate offered by the lender. Use our Honeymoon Rate Calculator to estimate the cost of the loan over a specific period of time.
• Lenders mortgage insurance (LMI): Insurance that the loaning institution takes out in case of default from the borrower, which the borrower must pay for. Usually applies to home loans with a higher LVR (more than 80%). Learn about LMI.
• LVR (loan-to-value ratio): This is the maximum proportion of the value of your home that can be loaned out to you. For example, a bank may approve your loan for 80% of the property value, in which you must pay the remaining 20% as your deposit. Find out how LVR affects your interest rate and LMI.
• Negative equity: Negative equity is when the market value of your property is lower than the balance remaining on your home loan. Find out more about negative equity
• Negative gearing: When the income from an investment property is not enough to pay the interest on the home loan for that property, negative gearing is currently available as a tax deduction against that income. Learn about negative gearing.
• Offset account: A savings account linked to your loan to offset the interest charged on your loan. The money (or credit) in your account is offset daily against your loan balance, which reduces the daily mortgage interest charges. Learn about offset accounts.
• Positive gearing: When you borrow money to invest, and the income you earn from an investment is higher than your ongoing expenses, then the investment is positively geared. Learn about positive gearing.
• Pre-approval: An initial approval process where the bank provides a borrower with an estimate of how much they could borrow, based on information they have provided to the bank. Find out how to get home loan pre-approval.
• Principal: In the context of a home loan, the principal is the amount of money that you borrow from a lender. It can refer to the initial size of a loan, as well as the amount of money left to pay off on a loan.
• Redraw: A home loan feature that enables the borrower to withdraw funds they have already paid. Usually this is conditional on a borrower being far enough ahead on loan payments, and based on the loan they have been approved for. A redraw facility is not available on all loans. Learn about the pros and cons of redraw facilities.
• Settlement date: The date on which transfer of ownership officially takes place – the buyer pays the rest of the purchase price, and the final legal documents are exchanged. It is also usually the date on which the buyer receives the keys and assumes possession.
• Split loan: A home loan in which a predetermined portion of the loan is locked in at a fixed interest rate and the rest comes with a variable rate of interest. Learn about split loans.
• Stamp duty: A state or territory government tax calculated on the home’s market value. Calculate your stamp duty with our calculator.
• Variable rate: A home loan interest rate that fluctuates according to the official cash rate set by the Reserve Bank of Australia. The rate can go up or down over time, varying your repayments.