If you're comparing investment property loans in Australia, the headline rate is the number most borrowers start with, and it deserves the attention. But the rate is the price of the money, not the price of the loan. Two loans advertised at similar rates can end up costing noticeably different amounts once you add application and valuation fees, lender mortgage insurance, ongoing package fees, the way each lender treats your rental income, and what you'd pay to leave.
This guide lays out the cost items worth putting in your comparison, the questions to ask each lender, and a simple way to put the whole thing on one page. It's written for people researching investment property loan rates Australia who want the comparison to reflect the actual cost rather than the advertised one.
Start with the rate, then price everything around it
ASIC's Moneysmart guidance on choosing a home loan points out that small differences in your mortgage interest rate can make a big difference to the long-term cost of your home loan. That's true for an investment loan too, and over a 25- or 30-year term a fraction of a percentage point compounds into real money.
The practical move is not to ignore the rate but to stop treating it as the summary of the loan. Build a table with one row per cost and one column per loan, and include a column for when the cost is paid — upfront, yearly, monthly, or only on exit. Costs that arrive at different times are easy to underweight when you're reading a product page.
Upfront costs to line up side by side
Ask each lender or broker for these in writing, not just as a "from" figure:
- Application, establishment or upfront fee
- Property valuation fee, and whether the lender chooses the valuer
- Settlement, documentation or disbursement fees
- Lender mortgage insurance, if it applies to your loan
- Legal and conveyancing costs (yours, not the lender's)
- Government charges such as transfer duty and registration — these vary by state and by your circumstances, so confirm the current position with the relevant state revenue office rather than relying on any website's estimate
Several of these are negotiable or waived in some circumstances and not others. The point of the table is to make differences visible; you can't compare what you haven't written down.
Lender mortgage insurance: three questions to ask
Lender mortgage insurance (LMI) is often one of the largest single upfront costs on an investment loan, and it behaves differently from a fee you pay once and forget. Because it can sometimes be added to the loan amount rather than paid at settlement, you may end up paying interest on it for years — which means the real cost is the premium plus the interest, not just the premium.
Verify these directly with the lender, because the answers depend on your loan size, deposit and property:
- Does LMI apply to my loan, and at what borrowing level does it start?
- What is the premium, and is it paid upfront or capitalised into the loan?
- If it's capitalised, what does that add to total interest over the term I'm considering?
Also ask whose interest the policy protects and what happens if you later refinance — whether any portion is refundable, and whether a new premium applies with the new lender.
How rental income is treated
This is where investment lending diverges most, both from owner-occupied lending and between lenders. Lenders don't all treat the same rent the same way: some count only a portion of it, some require specific evidence such as a lease or a rental appraisal, and some apply a different affordability test to investment loans than they would to a home you live in.
That matters because rental income is usually applied to servicing — the assessment of whether you can afford the repayments — not just to the rate. So it can influence the size of the loan you're offered as much as the interest rate does. Ask each lender:
- What share of the advertised or appraised rent do you count?
- What evidence do you need — a signed lease, a managing agent's appraisal, or both?
- Do you apply a different test or floor rate to investment loans?
- Do you treat rent from a property I already own the same way as rent from the one I'm buying?
Then run your own numbers with the rent reduced or removed entirely. If the loan still works on your figures without the rent doing the heavy lifting, you're in a much stronger position than a servicing calculator alone will tell you.
Features you pay for whether or not you use them
Moneysmart's guidance is blunt about this: mortgage features may come at a cost, and home loans with more options or features can come at a higher cost. Offset accounts, redraw, multiple repayments splits and portability are all commonly packaged with investment loans, and a package fee can apply every year regardless of how much you use.
Ask which features are standard, which attract a fee, and whether any can be removed later without a variation charge. Before you attach an offset account to an investment loan specifically, check the tax treatment with a registered tax agent or the ATO — the answer depends on your circumstances and on what the account is used for, and it isn't something to assume from a product brochure.
If you need a Sharia-compliant structure, Moneysmart publishes separate information on Islamic finance in Australia. Compare those products on the same cost basis as any other, using the same table.
Ongoing costs, and the cost of leaving
Beyond the rate and the annual fee, check:
- Whether the rate differs between principal-and-interest and interest-only periods, and what happens at the end of an interest-only term
- Monthly or annual account-keeping and package fees
- Whether there's a fee to split the loan or to make changes later
- Discharge, settlement or exit fees when the loan is paid out or refinanced
- Whether break costs apply if you fix and then need to exit early, and how they're calculated
Moneysmart also recommends calculating the cost of switching your mortgage to decide whether you could save money. That applies to the loan you're about to choose as much as to one you already hold: a cheaper rate is only worth switching to once the exit and entry costs are subtracted from the projected difference.
Stress-test the comparison: what if rates rise by 3%?
For breathing room, Moneysmart suggests calculating what your costs would be if interest rates went up by 3%. Apply that to the whole cost picture, not just the rate — a loan that looks cheapest today may not be the one that holds up best under that scenario, particularly if it carries a large annual fee or a capitalised LMI premium.
It's also worth modelling a couple of situations that have nothing to do with the rate: a period with no tenant, an interest-only period ending and repayments stepping up, or a special levy on the property. These aren't predictions; they're a way of checking that the loan still fits if something ordinary goes wrong.
A one-page comparison you can actually use
| Cost item | Loan A | Loan B | When it's paid |
|---|---|---|---|
| Interest rate (and type) | Ongoing | ||
| Application / valuation | Upfront | ||
| LMI premium | Upfront or capitalised | ||
| Annual / package fee | Yearly | ||
| Monthly account fee | Monthly | ||
| Discharge / exit fee | On exit | ||
| Break costs (if fixed) | On early exit |
Fill it from written quotes, then total each column across the period you expect to hold the loan — three years, five years, or the full term. Moneysmart's mortgage calculator can help you work out repayments and total loan cost at different rates and loan lengths, which pairs well with the table.
Your next step
Pick two or three loans you're genuinely considering. Request a written quote for each on the same loan amount, term and repayment type, then ask the rental income and LMI questions above in writing. Run the 3% test on each. Only then compare — and if the gap between them is narrower than the exit costs, staying put may be the better outcome.
You can read more about how different home loan structures are described at /money/home-loans/, or use /match/ to see options that may fit the details you provide.
General information only
This article is general information for Australian readers, not personalised legal, tax, financial, credit or migration advice, and not a recommendation of any lender or product. Nothing here is an offer of credit or a prediction that any loan will be approved. Fees, eligibility, how rental income is assessed and government charges change over time and differ between lenders and states, so confirm current details with the lender and, where relevant, your state revenue office, a registered tax agent or a licensed broker before you commit.