Top Strategies to Compare Investment Loans

Comparing investment loans properly means matching the loan structure to your property strategy, not just finding the lowest advertised rate.

Most lenders advertise headline rates for owner-occupiers, but investment loans typically carry a margin of 0.20% to 0.50% higher. The rate you actually receive depends on your deposit size, the property type, and whether you choose interest-only or principal and interest repayments. A loan that looks competitive on paper might not suit your cash flow needs or longer-term wealth plan. In Doncaster, where many investors hold properties in established pockets near Westfield or closer to new developments along Williamsons Road, the loan structure you choose can determine whether you hold the property through vacancy periods or sell prematurely.

The Budget changes announced in May last year mean negative gearing on established residential properties purchased after 12 May 2026 will be limited from 1 July 2027. Losses will only be deductible against rental income or capital gains from residential property, not wages. If you bought before Budget night, your existing arrangements are grandfathered. If you're buying now, the loan structure you choose should reflect the fact that tax deductions will be quarantined, and capital gains tax will shift to a minimum 30% rate with inflation indexing from 1 July 2027. This makes cash flow sustainability more important than it was under the previous rules.

What Features Should You Prioritise in an Investment Loan?

The most useful features are those that let you adapt the loan as your portfolio and income change. An offset account attached to an investment loan can hold rental income and reduce interest without altering your deductible debt. Redraw facilities let you access extra repayments, but some lenders treat redraws as new borrowings for tax purposes, which can complicate your deductions. Interest-only periods, typically available for up to five years, reduce your repayment burden and preserve your tax deductions, but they also mean you're not reducing the principal.

Consider an investor who bought a townhouse near The Pines Shopping Centre with a 20% deposit. They structured the loan with a 100% offset account and a five-year interest-only term. Rental income sat in the offset, reducing interest charges by around $4,000 per year without affecting the deductible loan balance. When they refinanced after three years to access equity for a second purchase, the offset balance transferred smoothly, and the loan remained fully deductible. That flexibility came from choosing the right features upfront, not from chasing the lowest rate.

How Do Interest-Only and Principal and Interest Structures Affect Your Strategy?

Interest-only loans keep your repayments lower and maximise your tax deductions, which is why they suit investors focused on capital growth rather than paying down debt. Principal and interest loans reduce your borrowing over time and build equity faster, but they also reduce your deductible interest each year. If you're planning to hold the property long-term and eventually convert it to your home, principal and interest makes sense. If you're building a portfolio and need cash flow headroom, interest-only is often the better fit.

In Doncaster, where median rents sit around $550 to $650 per week depending on the property type, an interest-only loan on a unit valued at the suburb median might cost around $2,400 per month at current variable rates, while principal and interest could push that closer to $3,100. The difference matters if you're holding multiple properties or if rental income doesn't cover all your costs during a vacancy. The interest-only period eventually reverts to principal and interest, so you'll need a plan for when repayments increase or a refinance option ready.

Should You Choose a Variable or Fixed Rate for an Investment Loan?

Variable rates let you make extra repayments, access offset accounts, and refinance without break costs. Fixed rates lock in your repayment for one to five years, which can help with budgeting, but they come with restrictions. Most fixed investment loans don't allow offset accounts, and if you need to refinance or sell during the fixed term, you'll pay break costs that can run into thousands of dollars.

With the CGT and negative gearing changes applying from 1 July 2027, some investors are fixing part of their loan to create certainty while keeping the rest variable for flexibility. A 50/50 split gives you access to offset on the variable portion while locking in a rate on the other half. That split structure works well if you expect rate movements but still want the option to access equity or pay down debt without penalty. There's no single answer, but the structure should match how actively you plan to manage the loan and whether you're likely to refinance within the next few years.

How Does Loan to Value Ratio Influence Your Rate and Borrowing Power?

Lenders price investment loans based on risk, and the loan to value ratio is the primary measure. An LVR below 80% typically avoids Lenders Mortgage Insurance and qualifies for better rates. An LVR above 80% attracts LMI, which can add several thousand dollars to your upfront costs, and a higher interest rate margin. Some lenders will lend up to 90% or 95% LVR for investment purposes, but the rate premium and LMI cost usually make it less viable unless you're confident in capital growth.

If you're using equity from your Doncaster home to fund a deposit on a second property, the LVR on both properties matters. Lenders assess your total exposure, not just the new loan. A scenario where you hold $800,000 in property with $500,000 in debt gives you a combined LVR of around 62%, which puts you in a strong position to negotiate rate discounts or access equity for further purchases. Understanding how LVR affects your borrowing capacity and rate means you can time purchases to avoid LMI or structure your loans to stay within the most competitive pricing tiers.

What Role Does Rental Income Play in Loan Serviceability?

Lenders typically assess rental income at 70% to 80% of the actual or expected rent, a reduction known as shading. This accounts for vacancy, maintenance, and body corporate costs. If a Doncaster unit generates $2,600 per month in rent, the lender might only credit $1,820 to $2,080 in your serviceability calculation. The higher your other income, the less impact this shading has, but if you're building a portfolio, the cumulative effect can limit how much you can borrow.

Some lenders apply different shading rates or allow you to use a rental assessment instead of the actual lease. If you're purchasing a property below market rent or planning a renovation, this can work in your favour. Others assess investment loans more conservatively if you already hold multiple properties. Knowing how each lender treats rental income means you can choose one that aligns with your portfolio size and income structure, rather than applying broadly and hoping for approval.

When Should You Consider Refinancing an Investment Loan?

Refinancing makes sense when your rate is no longer competitive, when you need to access equity, or when your loan features no longer match your strategy. Many investors refinance every two to four years to maintain a sharp rate and access equity as property values increase. With Doncaster's established areas showing steady capital growth over time, refinancing to pull equity for a deposit on a second property is a common approach.

If you're on a rate that's more than 0.30% above what new customers receive from the same lender, it's worth reviewing your options. Some lenders offer loyalty discounts or retention rates if you ask, but others won't adjust unless you threaten to leave. A refinance can also let you consolidate debt, switch from interest-only to principal and interest, or move to a lender with better offset functionality. The cost of refinancing, including discharge fees, application fees, and valuation costs, typically runs between $1,000 and $2,500, so the rate saving or equity access needs to justify the expense.

Choosing the loan structure that fits your investment approach takes more effort than comparing advertised rates, but the difference compounds over time.

The recent Budget changes mean cash flow and deduction planning matter more than they did under the old rules. If you're holding properties purchased after May last year, the quarantining of negative gearing losses and the CGT minimum rate from mid-2027 mean your loan structure should support rental income coverage, not just tax losses. If you're buying new builds, you retain the option to use the old CGT discount or the new inflation-indexed method, whichever suits you.

Call one of our team or book an appointment at a time that works for you. We'll compare loan options across the lenders we work with, show you how different structures affect your cash flow and tax position, and help you set up a loan that aligns with your property and wealth goals in Doncaster and beyond.

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