Property investor? You may be paying too much on your home loan

australian-property-investors-standing-in-front-of-house

While much of the attention has been focused on the owner occupier and, particularly, the first home buyer segments of the Australian property market, investors have been slowly making a comeback.

The latest figures released by the Australian Bureau of Statistics last week showed that new investment home loan commitments made increased by 2.1% during April 2021 to $8.1 billion - the highest level since June 2017.

Like first home buyers, upsizers or downsizers, there are a number of factors driving investors into the market at present, but one of those is low interest rates.

Of course, whether you’ve just purchased your first investment property or you’ve held one for years, you’ll know that most mortgage lenders charge higher rates on investment home loans than they do on owner occupier loans.

For instance, there’s currently a 42 basis point gap between the average variable rates for owner occupier (3.24%) and investor (3.64%) borrowers in our database for those making principal and interest repayments.

That doesn’t mean investors need to resign themselves to paying more than they need to on their mortgages though, because shopping around for a cheaper loan could really pay off.

Let’s say you have a $400,000 loan that you want to pay off over the next 20 years. If you were able to refinance from a variable rate of 3.64% to 3.00% your monthly repayments would fall by $131 and you’d save $31,278 in interest over the life of the loan.

And there are plenty of fixed and variable offers with headline rates below, for example, 3.00% at present… if you know where to look! So to help you kickstart your search, we’ve wrapped up five competitively priced investment home loans from a range of lenders.

5 INVESTMENT HOME LOANS

  • 12 month intro variable of 1.99% p.a. (2.71% p.a. comparison rate*) <80%LVR
  • Optional offset account
  • Free extra repayments and redraws

The Smart Booster Investor Bundle is built for borrowers looking to bundle their owner occupier and investment loans with the one lender. The loan offers investors an introductory variable rate of just 1.99% p.a. (2.71% p.a. comparison rate*) for 12 months which reverts to a competitive rate of 2.74% p.a. afterwards. It also comes equipped with flexible features like extra repayments, an online redraw facility and even an optional offset account (extra 0.10% interest loading), though there are a couple of one-off upfront fees to consider.

  • 1.99% p.a. fixed rate special offer for 1-year (2.60% p.a. comparison rate*) <80%LVR
  • No ongoing fees
  • Make free extra repayments (max. $20k per annum)

Owned by NAB, online bank UBank is usually up there with the most competitive lenders around and the Fixed UHomeLoan offer is no exception. The loan comes with low fixed rates for investors on 1, 3 and 5-year terms, though the lowest is currently a 1.99% p.a. (2.70% p.a. comparison rate*) 1-year special for eligible borrowers who apply by 30 June, 2021 and settle within 90 days. UBank allows investors to make free extra repayments towards the loan (up to $20k p.a.) and there are no ongoing fees to worry about.

  • Super low 2.17% p.a. variable rate (2.20% p.a. comparison rate*) <80%LVR
  • Make extra repayments and online redraws
  • Offset account available ($10/month)

At just 2.17% p.a. (2.20% p.a. comparison rate*), online lender Well Home Loan has one of the lowest variable rates currently on offer in our database for investors with an LVR below 80%. But that’s not all, as the Well Balanced loan gives investors the chance to pay off their loans faster by making extra repayments (for free) or to reduce the amount of interest they’re paying via an optional offset account ($10/month). There are a couple of upfront costs to consider though, including application, settlement and legal fees.

  • 2.39% p.a. variable rate (2.39% p.a. comparison rate*) for <60% LVR
  • Zero upfront or ongoing fees
  • Free extra repayments and redraws allowed

Online lender Athena is all about low rates and flexibility. That means investors can access rates from 2.39% p.a. (2.39% p.a. comparison rate*) with an LVR <60%, 2.49% p.a. (2.43% p.a. comparison rate*) with an LVR from 60% to 70% or 2.59% p.a. (2.48% p.a. comparison rate*) with an LVR <80%. Aside from having no fees, the loan allows borrowers to make extra repayments (free of charge) or to dip back into them down the line via an online redraw facility. Just bear in mind that the loan is only available for properties in capital cities or major population centres.

  • 2.59% p.a. (2.64% p.a. comparison rate*) variable rate for <70% LVR
  • Borrow between $100,000 - $2,500,000
  • Redraw facility and extra repayments available

Online lender Bluestone specialises in loans for PAYG or self-employed borrowers, including those looking to invest in property. The Prime Home Loan comes with competitive variable rates for investors starting from 2.59% p.a. (2.64% p.a. comparison rate*) for those with an LVR <70%, or 2.79% p.a. (2.84% p.a. comparison rate*) for LVRs between 70-80%. Extra repayments can be made towards the loan, or even withdrawn in the future via the redraw facility, though borrowers may want to weigh up the one-off application, settlement and discharge fees.

Want to see how these offers stack up? Check out the Mozo home loan comparison hub for even more investment home loans, plus guides, articles, calculators and more.

* WARNING: This comparison rate applies only to the example or examples given. Different amounts and terms will result in different comparison rates. Costs such as redraw fees or early repayment fees, and cost savings such as fee waivers, are not included in the comparison rate but may influence the cost of the loan. The comparison rate displayed is for a secured loan with monthly principal and interest repayments for $150,000 over 25 years.

** Initial monthly repayment figures are estimates only, based on the advertised rate, loan amount and term entered. Rates, fees and charges and therefore the total cost of the loan may vary depending on your loan amount, loan term, and credit history. Actual repayments will depend on your individual circumstances and interest rate changes.

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