Compare Investment Home Loans

Helpful Information

What is an investment loan?

An investment loan is a type of home loan that someone takes out to buy an investment property. It is a mortgage designed for those who want to buy a property and rent it out to receive income from it, but can’t afford to buy the property without a loan.

How does an investment loan work?

Investment loans generally work on a similar premise to all other home loans – when buying a property, you pay a deposit and the bank then lends you the rest of the money you need. You must then pay back that loan – plus interest charged by the lender – in regular installments, for the term of the loan.

Where investment loans typically differ from other types of home loans is in some of their approval conditions and features. For example, investment loans often require a lower loan-to-valuation ratio (LVR), meaning investors may need to raise a larger deposit before applying for a loan. They also have a slightly higher interest rate on average than residential home loans do, according to a recent rate analysis of Canstar’s database of more than 4,000 home loan products (June, 2020).

→ Learn more: Home Loans For Investment Properties

What are the pros and cons of owning an investment property?

There can be many benefits and challenges involved in owning an investment property. Before making any financial decision, it could be a wise idea to do your research and obtain independent financial advice. If you’re thinking of purchasing a particular property, you may also want to talk to a qualified solicitor or licensed conveyancer in your area to receive further advice tailored to your situation.

Potential benefits

While individual circumstances will differ, some potential benefits of owning an investment property could include:

A source of income

Provided you pay the accompanying mortgage off, investment properties can provide a long-term income stream that typically increases over time, in the form of the rent tenants pay to live there. However, there are also expenses that have to be taken into account when considering the financial rewards of this type of investment, such as maintenance costs and council rates.

Growth in property value over time

Australian house prices have generally grown over time, when looking at long-range figures. So, generally speaking, it could be said that the value of property investments have increased over the long term, too. However, in recent years many parts of Australia have also seen reductions in price growth, and the current predictions for housing price growth in the near future has not been as positive, due to the COVID-19 pandemic.

Potential tax advantages

The Australian Taxation Office (ATO) states that some of the costs of buying and maintaining an investment property can be claimed as tax deductions to reduce your taxable rental income generated by the property, as well as to potentially lower the capital gains tax you typically need to pay upon selling the property. The ATO states that the tax deductions you can claim for an investment property include:

  • Interest on the investment loan
  • Home and contents insurance and landlord insurance
  • Property agent fees and commissions
  • Repairs and maintenance costs
  • Council rates
  • Decline in value of certain depreciating assets such as timber flooring, carpets and curtains
  • Construction costs (“capital works”)
  • Costs of advertising for tenants

Learn more: What are negatively and positively geared investments? 

Potential disadvantages

While individual circumstances will differ, some potential disadvantages of owning an investment property could include

A capital loss

If the property market takes a turn for the worse after you buy a property for investment purposes, it could mean that your property is worth less than you paid for it, and perhaps even less than the value of the investment loan. This is called negative equity. If you have to sell the property, you could make a capital loss, which means you may have to pay the bank the difference between the property sale price and any leftover amount left on the loan.


If you can’t find a tenant for a period of time, you will have to pay the mortgage without the assistance of incoming rent. This could place you in financial hardship.

Tenant difficulties

Tenants can sometimes also pose a financial risk if, for example, they were to damage a property or cause strife and need to be evicted. This could cause financial loss if you have to repair the property or pursue legal action to evict them.

Maintenance and expenses

If you own an investment property and want to be able to attract and retain prospective tenants, you must generally keep it in an inhabitable condition and fix safety concerns promptly. To protect your asset, you may also need to carry out regular maintenance, such as painting, as well as pay regular expenses, such as council rates.

These are just some of the possible pros and cons of owning an investment property. It is a wise idea to consider all costs before deciding to invest in property, and obtain qualified independent advice.

How to compare investment home loans

Canstar currently compares more than 4,000 home loans, to provide home buyers with confidence when they compare mortgages and interest rates.

Use our home loan comparison selector to compare investment loans by inputting the information that applies to you, selecting ‘Investing’ in the ‘Loan Purpose’ field, and then hitting the “compare” button. You will be presented with a list of products, which will typically be ordered according to their Canstar Star Rating, or their applicable interest rates. You can change the order of the listed results by adjusting the settings at the top of the list, and change what is in the list via the filter function.

Learn more about Canstar

When it comes to comparing home loans, the interest rate is an important consideration and can make a significant difference in the total cost of any loan. However, there are a number of other factors you may also want to consider. These factors include:

When you compare home loans with Canstar, you can easily view the advertised interest rate and comparison rate, as well as the fees and features attached to each product. The product’s Star Rating is also displayed, to help you find a home loan that has been deemed to offer outstanding value by Canstar Research.

Comparing interest rates

Home loan interest rates can vary significantly between home loan providers and also between principal and interest and interest-only loans. Because home loans are a long-term debt, even small differences in interest rates can make a big difference to the total amount you will pay on your loan over its lifetime.

A home loan comparison rate is designed to give borrowers a more accurate indication of the true cost of a loan and incorporates factors including the interest rate as well as most fees and charges.

Use our Mortgage Calculator to help you work out what your interest rate could cost you, both in monthly repayments and over the life of the loan.

Comparing features

You can use our website to compare the features of a wide range of home loans that may be available for your situation.

Learn more about the features you may want to consider in our Canstar Home Loans Star Ratings report. A summary of the features that Canstar researches and rates in an outstanding value home loan are contained in the Methodology attached to the report.

This article was reviewed by our Sub-editor Tom Letts before it was published as part of our fact-checking process.

Author: Nina Tovey


Nina is the Editor-in-Chief of Canstar, Australia’s biggest financial comparison site. She is responsible for leading the editorial strategy, and works with a team of journalists to drive traffic through delivering compelling and insightful content to consumers looking for support with their finances. You can follow her on Instagram or Twitter.


Who can buy an investment property?

Recent statistics from the Reserve Bank of Australia show that young people are increasingly getting involved in property investment. 30% of property investors are under 40 years old, and another 60% are under 50 years old. About half of all property investors have a household income under $100,000.

There are some important restrictions on who can purchase an investment property in Australia. In short, Australian citizens can buy as many investment properties as they can realistically afford to pay for, and those properties can be established or new dwellings or vacant land to build on.

Residents who are not citizens can buy one established dwelling to live in, plus new dwellings or vacant land for an investment property. They cannot buy established dwellings as an investment property.

Non-residents can only buy new dwellings, off-the-plan properties that are under construction or not yet built, and vacant land for building on. They cannot buy established dwellings as an investment property.

These restrictions are a good thing for the Australian property market. It keeps our housing market more affordable by making sure that established dwellings are more available for first home buyers and owner occupiers to buy, and not for investors who would rent out the property.


Interest rates for investment loans are typically slightly higher on average than interest rates for residential home loans. Investors should always consider more than just the interest rate that applies when considering the cost of an investment loan, of course.

There are several home loan fees and costs common to investment loans:

  • Establishment fee: Charged as a one-off payment when you start an investment loan. (a.k.a. application, up-front, start-up, or set-up fees.)
  • Lender’s mortgage insurance (LMI): This insurance is charged to the borrower, but it is effectively insurance for the credit provider in case the borrower cannot repay the loan.
  • Ongoing fee: Charged on a monthly or annual basis to pay administration costs for the loan. (a.k.a. service fee or administration fee.)
  • Discharge fee: Charged when you pay out your home loan in full. (a.k.a. termination fee or settlement fee.)
  • Early exit fee: Charged if you pay out your home loan in full within a certain timeframe. (a.k.a. early termination, deferred establishment, deferred application, or early discharge fee.)
  • Break fee: Charged if you switch from a fixed rate loan to another loan before the end of the fixed rate period.

What to look for in an investment loan

Visitors to CANSTAR’s home loan comparison tables frequently search for features such as an offset account or redraw facility, and the ability to repay their mortgage faster with additional repayments.

CANSTAR also considers the following features that affect the value of a loan:

  • Security and guarantee requirements
  • Ability to make additional repayments, or a top up facility
  • Redraw or transactional facility available
  • Offset account available
  • Split loan option available
  • Portability feature allowing loan to transfer from one property to another

Looking for information on fractional property investment? Find out more about fractional property investment here.

Investment Loan Case Study

Sally purchased her first investment unit on the Gold Coast back in 2013, in preparation for the upcoming swell of people moving here or visiting for Olympic Games.

She has chosen an investment loan with low fees, but the interest rate is much higher than she would like, especially after comparing her loan to others listed on the CANSTAR comparison website. Now that she has repaid a considerable amount of her loan balance, she would also like to look for a loan that would not charge lender’s mortgage insurance (LMI).

After carefully doing her sums around what it would cost in break fees to switch loans at this stage, she is still confident that a lower interest rate would save her a significant amount of money in the long run.