Last reviewed October 2026 by Megan Birot, Content Editor, OurTop10. Figures checked against the sources named in the article.An investment property loan is priced higher, assessed harder and structured differently from the loan on your own home. This guide covers where investor rates sit in September 2026, interest-only versus principal and interest, how much deposit you need and where it can come from, and the servicing test lenders actually run, with a calculator further down that shows what a lender will let you borrow against a given rent.
What an investment property loan is
An investment property loan is a mortgage on a property you rent out rather than live in. The paperwork looks like an ordinary home loan, and most of the products are the same ones owner-occupiers use, but the lender prices and assesses it differently because the risk is different. An investor who hits trouble stops paying the loan on the rental before the loan on their own home, and the banks have forty years of arrears data to prove it. So investment loans carry a higher rate, a lower maximum loan-to-value ratio at most lenders, and a servicing test that counts the rent at less than face value.
The other difference is tax. The interest on an investment loan is deductible against the rent, and if the property runs at a loss, against your salary as well, subject to the negative gearing rules that changed in the May 2026 budget. That deduction is why investors structure their loans in ways an owner-occupier never would: interest-only terms, offset accounts kept separate from the family home, and a refusal to pay down the investment debt while any non-deductible debt remains.
Investment loan rates in September 2026
The cash rate is 4.35% after three rises earlier this year, and the four big banks all expect another quarter-point move to 4.60% before Christmas; NAB has it in September, the other three in November. That sets the floor for what investors pay. As at 14 September 2026 the lowest advertised investor variable rates sit just under 6% for principal and interest and around 6.1% for interest-only, while the average investor variable rate across the market is 7.22%. The gap between the best rate and the average is more than a full percentage point, which on a $600,000 loan is about $7,000 a year. Very few investors on the average rate know they are on it.
Against owner-occupier rates, investment loans run 0.1 to 0.5 percentage points higher for principal and interest and another 0.1 to 0.3 on top for interest-only. Lenders adjust these margins to control how much investor lending they write, so the gap moves; when a bank wants investor business the margin shrinks, and when the regulator leans on them it widens.
Interest-only or principal and interest
Most investors take an interest-only term, usually five years, sometimes renewable to ten. The logic is that only the interest is deductible, so paying down principal on the investment loan puts money into non-deductible debt reduction that would be better used clearing the mortgage on your own home or sitting in an offset. On a $560,000 loan at 6.4%, interest-only costs $2,987 a month. Principal and interest over 30 years costs $3,503. The $516 a month difference is the principal, and the investor would rather have it in an offset against their home loan.
The trade-offs are real. Interest-only rates are higher, the loan is not shrinking, and when the interest-only period ends the repayment jumps to principal and interest over the years that remain, which on a 30-year loan after five years interest-only means 25 years of catch-up. Lenders also assess an interest-only loan on that higher future repayment, not the interest-only one, so it reduces how much you can borrow. Principal and interest suits an investor who has no other debt and wants the equity built faster; interest-only suits one who still owes money on their own home.
How much deposit you need
Twenty percent of the purchase price plus costs is the clean answer: no lenders mortgage insurance, access to every lender, and the sharpest rates. On a $700,000 property that is $140,000 plus roughly $30,000 for stamp duty, legal and inspection costs, so about $170,000 in cash or equity.
Below 20% the options narrow. Most lenders will go to 90% for investors with LMI, which on a $630,000 loan at 90% costs somewhere between $12,000 and $18,000 depending on the lender and whether it is capitalised into the loan. A handful will lend to 95% for investors, at a higher rate and with a much harder look at your income. Very few will go past that.
The deposit does not have to be cash. Most investors fund it from equity in their own home: if the home is worth $1,000,000 with a $500,000 loan, the lender will usually let you borrow up to 80% of its value, so $300,000 of usable equity is available as the deposit and costs for an investment purchase. Done properly, that is a separate loan split secured against the home, not a single loan across both properties. Cross-collateralising the two, which is what a bank will offer by default, ties the properties together so that selling or refinancing one requires the bank’s consent on the other. Our cash-out refinancing guide covers how to release the equity without doing that.
How a lender decides whether you can afford it
This is where most investment loan applications live or die, and it works nothing like the calculation you did on the back of the listing. The lender runs a servicing test with four adjustments that all go against you.
- Rent is counted at 80% of the appraised figure, and some lenders use 75%. A $650 a week rent becomes $520.
- The repayment is assessed at your actual rate plus a 3 percentage point buffer, on a principal and interest basis over the remaining term, even if you have applied for interest-only. A 6.4% loan is tested at 9.4%.
- Your living expenses are set at a benchmark for your household size and income, or your declared figure, whichever is higher.
- Every other debt counts in full. Credit card limits are assessed at about 3.8% of the limit per month whether you use the card or not; HECS repayments come off your income; a car loan is its full repayment.
Take that $560,000 loan at 6.4% with $650 a week rent. The lender counts $27,040 of rent, tests the repayment at $4,668 a month or $56,016 a year, and needs your income after tax, living expenses and other debts to cover the $29,000 gap. Some lenders add back the negative gearing benefit, which helps a higher earner; many do not. The borrowing capacity guide covers the levers that move this number, and the calculator below runs the servicing test the way a lender does.
Investment loan servicing calculator: what a lender will let you borrow
Enter your income, living costs, debts and the property. The calculator runs the test the way a lender does: rent shaded to 80%, the repayment assessed at your rate plus 3 points on principal and interest, and every debt counted in full.
Built by OurTop10. Results are estimates for comparison only and are not credit advice. Figures stay in your browser and are not sent anywhere.
Fixed, variable or split
The same three choices as any home loan, with one investor-specific wrinkle. A fixed rate gives certainty on the biggest cost in the yield sum, which matters when the rent is set for twelve months and the cash rate is expected to move. It also usually comes without an offset account, or with a limited one, and with break costs if you sell during the term. Investors who plan to hold for years and want to know their shortfall to the dollar fix; investors who might sell, refinance or draw equity within the term stay variable. A split, part fixed and part variable with the offset attached to the variable portion, is the common compromise. The fixed versus variable guide has a break-even calculator for the decision.
Offset accounts and investment loans
An offset account attached to an investment loan reduces the interest you pay and therefore the deduction you claim, which is fine, and it keeps the loan balance intact, which matters. If you instead pay extra into the loan and later redraw it for a personal purpose, the redrawn amount is no longer deductible, because the Tax Office looks at what the borrowed money was used for. Money parked in an offset never touches the loan, so the full balance stays deductible. For an investor who also has a home loan, the offset belongs on the home loan first, because that interest is not deductible at all.
What the loan costs beyond the rate
- Application or establishment fee: $0 to $800, often waived on request.
- Valuation: usually paid by the lender, sometimes $200 to $400 for a full valuation on a unique property.
- Annual package fee: $250 to $400 where the loan is part of a package with an offset and a credit card; check whether the package discount is worth it.
- Lenders mortgage insurance: a one-off premium for loans over 80% of the value, tax-deductible over five years for an investor.
- Discharge fee: $150 to $400 when you refinance or sell.
- Stamp duty, legal fees and inspections are costs of the purchase rather than the loan, and they are added to the cost base for capital gains tax rather than deducted. The investment property tax guide lists what can and cannot be claimed.
Getting the loan approved
- Get pre-approval before you look, from a lender whose investor policy suits you. Pre-approval that expires mid-search is a common story; most last 90 days.
- Have a written rental appraisal ready. The lender will order its own valuation and rental estimate, but yours sets the expectation.
- Cut credit card limits before applying, not after. A $20,000 limit costs about $90,000 of borrowing capacity.
- Keep the deposit in a separate account with three months of statements. Equity from your home needs a current valuation, which the lender will arrange.
- Do not change jobs, take on a car loan or open a buy-now-pay-later account between pre-approval and settlement. Lenders re-check.
A broker who writes investment loans regularly knows which lenders are shading rent at 75% this month and which are adding back negative gearing, and that knowledge is worth more on an investment loan than on any other kind. Our Sydney, Melbourne and Brisbane shortlists mark the brokers who specialise in investors.
Frequently asked questions about investment property loans
How much deposit do I need for an investment property?
Twenty percent of the price plus about 5% for costs avoids lenders mortgage insurance and opens every lender. Most lenders will go to 90% with LMI, and a few to 95%. The deposit can come from equity in your own home, released as a separate loan split.
Are investment loan rates higher than home loan rates?
Yes. In September 2026 investment loans sit 0.1 to 0.5 percentage points above owner-occupier rates for principal and interest, with interest-only higher again. The lowest investor variable rates are just under 6%, and the market average is about 7.2%, so the choice of lender matters more than the investor premium.
Should I take an interest-only investment loan?
Usually yes if you still have a loan on your own home, because only the interest is deductible and spare cash does more work in an offset against non-deductible debt. Usually no if you have no other debt. Either way, the lender assesses the loan on the principal and interest repayment that starts when the interest-only term ends.
How do lenders assess an investment loan?
They count 75% to 80% of the rent, test the repayment at your rate plus 3 percentage points on a principal and interest basis, apply a living-expense benchmark, and count every other debt in full. Some add back the tax benefit of negative gearing; many do not. This is why the same borrower can be offered very different amounts by different lenders.
Can I use equity in my home as the deposit?
Yes. Lenders will generally let you borrow up to 80% of your home’s value, and the difference between that and your current loan is usable equity. It should be set up as a separate loan split secured against your home, not as one loan across both properties.
Did the 2026 budget change investment loans?
Not the loans themselves, but the tax around them. Established properties bought after 12 May 2026 lose the ability to claim losses against salary from 1 July 2027, which changes the after-tax cost of holding a negatively geared property. New builds and properties owned before that date keep the old treatment. Lenders do not use the tax refund in their servicing calculation, so borrowing capacity is unaffected.
Mansour Soltani
Head of Research, OurTop10
With over two decades of experience in Australia’s real estate sector, Mansour has built a career specialising in the acquisition and sale of investment and commercial properties, spanning major metropolitan hubs and regional areas. As the founder and owner of a finance brokerage firm, he manages a loan portfolio exceeding $200 million while serving a broad range of clients nationwide.
A frequent contributor to money.com.au, Mansour has developed a deep understanding of diverse investment strategies, enabling him to provide valuable, well-informed perspectives on market trends and opportunities.