CompareAll Business InsuranceCompare Business InsuranceOverseas Visitor CoverAll LoansCompare Loans
An investment home loan is a loan to buy a property you will rent out rather than live in. Lenders charge investors more: in July 2026 the RBA's average rate on new variable investor loans was 6.40%, against 6.24% for owner-occupiers. Interest-only repayments, which investors use more often, usually cost more again.
This page explains how lenders price and assess investor loans, the interest-only trade-off, APRA's limit on high debt-to-income lending (which applies separately to investors) and the tax rules the ATO applies to interest and borrowing costs.
By Better Rate Mate Editorial Team · Last reviewed
Lenders price investment loans above owner-occupier loans. The gap shows up in every RBA series: on both new and outstanding loans, investors pay more on average than owner-occupiers.
| Loan type | Owner-occupier | Investor |
|---|---|---|
| New variable loans | 6.24% | 6.40% |
| New interest-only loans | 6.98% | 6.50% |
| New principal and interest loans | 6.16% | 6.32% |
| New loans at 81% LVR or more | 6.33% | 6.74% |
| All outstanding variable loans | 6.24% | 6.48% |
On an interest-only loan your repayments cover interest only for a set period (for example five years), so the balance doesn't fall. When the period ends the loan switches to principal and interest over the remaining term, and repayments jump. Moneysmart's advice is to work out the higher repayment before you commit and make sure you can afford it.
Illustration: on a $600,000 loan at 6.24%, interest-only repayments are $3,120 a month; principal and interest over 30 years is about $3,690. After a five-year interest-only period, the principal and interest repayment over the remaining 25 years is higher still. Some lenders cap interest-only by LVR: CommBank, for example, only offers investment interest-only below 90% LVR.
Lenders test serviceability at the loan rate plus APRA's 3 percentage point buffer, counting your existing debts, including other investment loans, and the expected rent. Since 1 February 2026 APRA has limited each bank's new lending at a debt-to-income ratio of six or more to 20% of its new mortgage lending, applied separately to owner-occupier and investor lending. APRA said the limit would bite on investors first, because they typically borrow at higher DTI ratios.
APRA's June quarter 2026 figures show investors took 35.6% of new bank home lending, and 8.9% of new investor loans had a DTI of six or more, compared with 3.7% of new owner-occupier loans.
Interest on a loan used to buy a rental property is generally deductible while the property is rented or available for rent. What matters is how the borrowed money is used, not what secures the loan: the ATO's example is a couple who borrow against their rental to buy a new home, and can't claim that interest because the new home doesn't produce income.
If part of a loan is used for private purposes (a car, a holiday, redraw for personal spending), you must apportion the interest and can only claim the rental share. Borrowing expenses, including lenders mortgage insurance and loan establishment fees, are claimed over five years or the loan term if shorter; if they total $100 or less you can claim them in the year you incur them. Get advice from a registered tax agent for your situation.
Many investors borrow against the equity in their home for the deposit. Keeping the investment borrowing in a separate loan (or split) from your home loan makes the interest easier to track for tax. Lenders differ on which investors they suit: Athena, for example, offers loans to companies and trusts that take future rental income into account, while ING doesn't offer fixed rates to investors with less than a 20% deposit.
The RBA's average rate on new variable investor loans was 6.40% in July 2026 (published 7 September 2026). Your rate depends on the lender, your LVR and whether you choose interest-only. Get each lender's key facts sheet for your loan amount.
Lenders price investor lending above owner-occupier lending. In July 2026 new investor variable loans averaged 6.40% against 6.24% for owner-occupiers.
Generally yes, for the portion of the loan used to buy or maintain a property that is rented or available for rent. Interest on any part used for private purposes isn't deductible.
The ATO treats LMI on a rental property loan as a borrowing expense, claimed over five years or the loan term if shorter (or immediately if total borrowing expenses are $100 or less).
At 6.40% a year, interest on $1,000,000 is about $5,333 a month. Principal and interest repayments over 30 years at that rate would be higher, because they also repay the loan.
We don't quote lenders' interest rates: they change daily and with every RBA decision, and we don't have a live rate feed. The averages we quote are the RBA's published figures for the month shown. Always get the lender's key facts sheet, which shows the rate and comparison rate for your loan amount.
