The biggest savings on an investment loan come from the rate: the gap between the average investor variable rate (6.89%) and the lowest advertised (around 5.94%) is worth about $5,700 a year on a $600,000 interest-only loan. After that, an offset account, the right repayment type, cutting unnecessary fees and keeping your LVR at 80% or less all add up. Here is where the money goes and how to keep more of it.
Where the savings are
| Strategy | Example saving on a $600,000 loan | Effort |
|---|---|---|
| Refinance from the 6.89% average to a 5.94% rate | About $5,700 a year (interest-only) | Medium: new application and switching costs |
| Negotiate 0.25% off with your current lender | $1,500 a year (interest-only) | Low: a phone call or email |
| Hold $40,000 in an offset account at 6.89% | About $2,760 a year | Low: move savings into the offset |
| Drop a package you don’t use | Often $300 to $400 a year in fees | Low |
| Keep LVR at 80% or less | Avoids lenders mortgage insurance, often thousands of dollars upfront | Depends on your deposit or equity |
Our calculations, excluding fees. Average and lowest investor variable rates from Canstar, as at 2 October 2026.
1. Get a sharper rate
Rate is where most of the cost sits. Every 0.25% is worth $1,500 a year on a $600,000 interest-only loan, so start here.
- Ask first. Tell your lender what competitors are offering and ask them to match it. Lenders often have retention discounts for customers who ask. See how to negotiate.
- Then compare. If they won’t move, refinance. Weigh the saving against discharge, application and valuation fees, and any break costs on a fixed loan.
- Compare packages properly. A package with one annual fee can cover several loans and include offsets and rate discounts. See how to compare investment loan packages.
2. Use an offset account
An offset account reduces the balance you’re charged interest on, dollar for dollar. Holding $40,000 against a 6.89% investment loan saves about $2,760 a year.
If you also have a home loan, it usually makes more sense to put spare cash against that first, because home loan interest isn’t tax deductible. Either way, an offset keeps your money available and doesn’t change the purpose of the loan, unlike redraw.
3. Choose the right repayment type
Interest-only repayments keep cash flow higher in the short term, but interest-only investor rates are usually higher than principal and interest, and you pay interest on the full balance for longer. If you don’t need the cash flow, principal and interest is usually cheaper overall. If you do use interest-only, an offset can give you the flexibility to pay down debt without locking the money away.
4. Cut fees you don’t need
Look at the total cost of the loan, not just the rate. Common fees include:
- Annual package fees, often a few hundred dollars. Worth paying only if you use the offset or discounts.
- Ongoing monthly account fees on basic loans.
- Application, valuation and settlement fees when you take out or switch a loan. Some lenders waive them.
- Break costs on fixed loans if you repay early or refinance during the fixed term.
- Discharge fees when you close a loan. Exit fees on new loans were banned in 2011, but discharge fees still apply.
5. Keep your LVR at 80% or less
Borrowing more than 80% of the property value usually means paying lenders mortgage insurance, and many lenders charge higher rates above 80%. Some offer sharper pricing again at 70% or less. If your property has grown in value, ask your lender for a revaluation: a lower LVR can move you into a cheaper pricing tier without refinancing.
6. Claim what you’re entitled to
Interest and many running costs on an investment property are generally tax deductible against the property’s income. From 1 July 2027, losses on established residential property bought after 7.30 pm AEST on 12 May 2026 can only be offset against residential property income, not your salary. Properties held before then keep the current rules. Speak to a tax adviser about what applies to you.
Frequently asked questions
Can I negotiate the rate on an investment loan?
Yes. Lenders regularly discount rates for existing customers who ask, especially if you have a competing offer, a good repayment history and an LVR of 80% or less. Ask your lender to review your rate, and be ready to refinance if they won’t match the market.
Is it worth refinancing an investment loan?
Often, if the rate gap is large. Moving from the 6.89% average investor rate to a rate near 5.94% saves about $5,700 a year on a $600,000 interest-only loan. Subtract switching costs, such as discharge, application and valuation fees, and check for break costs if your loan is fixed.
Which investment loan fees can I avoid?
Many. You can often avoid ongoing account fees by choosing a no-fee loan, avoid package fees if you don’t use the offset, have application and valuation fees waived when you switch, and avoid lenders mortgage insurance by borrowing 80% or less of the property value.
Sources
- Canstar, Average home loan interest rates, as at 2 October 2026
- ASIC Moneysmart, Switching home loans
- ASIC Moneysmart, Mortgage offset accounts
- Australian Taxation Office, Interest expenses on rental properties
General information only. It does not consider your objectives, financial situation or needs and is not credit, tax or financial advice.