The basics
An investment loan works similarly to a regular home loan — you borrow from a lender, secure the loan against the property, and repay over time with interest. But there are some important features worth understanding before you commit.
Repayment types
Principal & Interest (P&I) — you repay both the amount borrowed and the interest each repayment. Your balance reduces over time and you build equity. The most common structure.
Interest Only (I/O) — you only repay the interest for a set period, typically 1–5 years. Your balance stays the same. Popular with investors to keep short-term repayments lower — especially useful if the property is negatively geared.
Interest rate types
Variable rate — your rate moves with the market. Offers flexibility and features like offset accounts. Better positioned if rates fall.
Fixed rate — locked in for 1–5 years. Predictable repayments regardless of market movement. Less flexibility but great for budgeting certainty.
Split rate — a portion fixed, a portion variable. The best of both worlds.
Key features to look for
Offset account — a linked transaction account that reduces the interest you're charged. $30k in your offset on a $500k loan means you only pay interest on $470k.
Redraw facility — access extra repayments you've made above the minimum. Useful for property repairs or your next deposit.
Interest-only period — keeps repayments lower short-term, which helps with cash flow especially if your property is negatively geared.
Loan portability — transfer your existing loan to a new property if your investment strategy changes, saving time and setup costs.
Which combination is right for you?
There's no universal answer — it depends on your income, tax situation, cash flow and how many properties you want to build toward. A broker looks at your full picture and recommends the right structure, not just the lowest rate on the day.
Want to talk through what makes sense for your situation? Book a free chat with Kick Finance.
