Loan Rates

Understanding investment home loan rates

Nathan Gooley
Jul 5, 2021
Yard Financial Pty Ltd | ACN 623 357 513 | Australian Credit Licence 509481

Table of Contents

Getting into the property market isn’t always about buying a home to live in. It can also be an excellent investment and wealth creation opportunity. If this is your situation, you’ll want to understand investor home loan rates and the differences they may have with owner-occupier rates. You’ll also want to know the advantages you may get with investment home loan rates and the things you need to consider.

What are investor home loan rates?

Investor home loan rates are applied to the home loan or mortgage you would take out on a property you’ve purchased to use as an investment. This means the property will be rented out and generate an income for you rather than a property you live in.

How are investor loan rates different from owner-occupier rates?

The main difference between investor home loan rates and owner-occupier rates is that lenders often offer lower or more discounted rates to owner-occupiers. This is because lenders see property investment as a higher-risk, and therefore investor home loan rates are higher.

What are some advantages that come with investment home loan rates?

When purchasing a property that you’re solely going to use as an investment property and not live in, understanding the benefits of getting an investment home loan will help. 

  • Tax benefits - As you’re earning an income from your investment property, you may be able to claim your investment loan interest on tax. If the cost of maintaining the property outweighs the income, it’ll be negatively geared. You can then also claim the expenses of maintaining the property on your tax return.
  • More competitive interest-only rates - Investors are the most common interest-only borrowers; therefore, lenders will often offer them more competitive rates to get their business.

What are some of the things you need to consider about investment home loan rates?

There are also some things you’ll need to consider before taking on an investment home loan.

  • Generally higher interest rates - Investor mortgages are seen as a higher risk to lenders, which means they implement higher rates for investor home loans.
  • Not eligible for most government grants or incentives - If you’re a first home buyer and choose to purchase an investment property, you won’t be eligible for the first home buyer grant or any stamp duty concessions.
  • Tax implications when you sell - If the property's value increases between the time you purchase it and sell it, you'll be required to pay Capital Gains Tax (CGT). CGT is charged on the profit you make from any investments you own. Your principal place of residence is exempt from CGT. But because you earn an income from an investment property, it's subject to CGT.

Do you have to use investor home loan rates if your property is an investment?

Yes, you need to use investment home loan rates if 100% of your property is being rented out and earning an income. However, if you’re only renting out part of your property whilst living in it, you can use an owner-occupier loan. 

The government increased regulations around these loan types to help lenders manage their portfolios and exposure to investment loans. This means they often include in your home loan contract that they need to be informed if the purpose of your property changes. So if you live in your property for a few years and then decide to move out and use the property as an investment property, you’ll need to let your lender know.

If you now have a better idea of investment home loan rates and want to find the right investor home loan for you, check out Yards investor home loan rates


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