Competitive deals on interestonly loans are still available if you know where to look
The top three placegetters here are all mortgage managers. Unlike brokers, mortgage managers source funds and approve loans directly, without the need to negotiate with another lender. You continue to have a relationship with your mortgage manager through the life of your loan.
James Slack, Canstar’s banking senior research analyst, says: “Compared with many lenders who have been increasing rates on investment loans, the winners in both the non-bank and bank categories offer similar pricing to both property investors and owner-occupiers.”
Gold winner AMO is certainly no exception. “It offers value for money across the spectrum of all its investment loans,” says Slack. Its standout product is its two-year fixed loan. “Unlikely many other lenders, AMO is not charging more for interest-only versus principal and interest repayments.”
Aussie comes in at No. 2 with its standard variable investment loan at 4.49%. Lenders mortgage insurance can be borrowed and added to the loan but your lending valuation ratio (LVR) cannot exceed 85%. For home loans with Aussie the LVR can be as high as 95%. Redraw is available but there is no offset account.
Homeloans’ Ultra Plus loans start from 4.26%. No application fees or valuation fees apply although settlement fees do. Interest-only for up to 10 years is available, although there is a loan fee.
While generally it makes no sense to pay interest only on non-tax deductible debts such as a home loan, in some cases for investment loans it can work. The combination of negative gearing and concessional capital gains tax means interest-only loans can make sound financial sense. But it’s always best to get advice from an expert and be sure you understand the risks in taking on an interest-only loan.