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Investment Home Loans

An investment home loan is type of loan that you apply for when the purpose of the loan is for investment purposes.

Most commonly, the loan is used for the purpose of purchasing an investment property, however, you can also get an investment loan for non-property related investments, such as investing to buy shares or ETFs. 

However, most banks will only accept personal investment or property investment for this type of loan as an acceptable purpose.  This means, investing in commercial property or investing in a business are not acceptable for this type of loan product.  If you are using the borrowed funds for business purposes or commercial investment, you will this type of loan is not suitable.

Investment home loans usually has a higher interest rate compared to owner occupied home loans.  This is the case for both variable and fixed rates.

Not all banks have the same policy when they decide whether your investment home loan will attract investment home loan rates.  There are some banks that will offer you an owner occupied home loan interest rate if the property you’re borrowing against is for owner occupied purpose.

For example, you’ve had your property for several years now and have been paying down your home loan.  At the same time, the value of the property has increased.  A common way strategy is to borrow against the equity in your property and use it to invest into property or shares. 

In this case, you are borrowing the money for an investment purpose, but you are borrowing it against your owner occupied property.  Under this situation, the some banks will offer you an owner occupier home loan rate instead of the more expensive investment home loan rate.

The difference between owner occupied home loan rate and investment home loan rate can be between 0.10% to as much as 0.50% depending on the bank.

A few things to be aware and consider relating to investment home loans:

  • Just because your loan is an investment home loan – it does not mean it’s automatically tax deductible.  This is a product name used by the bank to differentiate loan types and charge different types of interest.  Vice versa, just because your loan is a home loan (owner occupied), does not mean it’s automatically non-tax deductible.  When it comes to these matters, it’s really important you obtain professional tax advice from your tax agent or accountant.

  • Investment home loans allow you to choose interest only repayment options if you qualify.  It is less common to have an interest only repayment structure on owner occupied home loans. 

  • If you have moved into an investment property with an investment home loan, it is a good idea to contact your bank to see if they can change your loan to an owner occupied home loan as you would get a lower interest rate
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