Loans for Investment Purposes

It is a home loan taken out to purchase or renovate a property purely for investment purposes. The buyer will not live in this property and the sole purpose of this property is to rent it out or retain it for purposes of capital growth and building equity. Generally, investment loan interest rates are higher compared to owner-occupied loans. For example, a variable interest home loan for an owner-occupier might be available at 2.69% but for investment mortgages, the interest rate for a comparable loan might be 3.29% or more depending on if you chose to pay principal & interest or interest-only repayments.

You also need to put forward a bigger deposit for an investment home loan, as most lenders restrict their maximum lending at 90% inclusive of LMI and with such lenders approx. 12% deposit is minimum requirement.

Most banks will use 70% to 80% of your rental income in the assessment and they will use negative gearing into account too when doing serviceability calculation.

Investment loans are generally at higher risk than standard home loans and tend to default more. Hence, you need to be in a strong financial position to qualify.

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