What is a Fixed Rate Investment Loan?
A fixed rate investment loan is a property investment loan where the interest rate remains locked for a specific period, typically between one and five years. Unlike a variable interest rate that fluctuates with market conditions, a fixed interest rate provides certainty over your investment loan repayments during the fixed period.
For property investors in Victoria looking to build wealth and expand their portfolio, understanding the difference between fixed and variable rate options is crucial when buying an investment property. The right investment loan features can significantly impact your property investment strategy and overall financial outcomes.
Key Benefits of Fixed Rate Investment Loans
Fixed rate investment loans offer several advantages for Victorian property investors:
- Payment certainty: Your repayments remain consistent throughout the fixed period, making it easier to calculate investment loan repayments and manage cash flow
- Protection from rate rises: If interest rates increase, your investment loan interest rate stays the same
- Budget planning: Predictable costs help you plan for other claimable expenses and maximise tax deductions
- Portfolio growth stability: Consistent repayments support sustainable expansion of your rental property loan portfolio
These investment loan benefits make fixed rates particularly attractive during periods of economic uncertainty or when investor interest rates are expected to rise.
Fixed vs Variable Rate Investment Loans
When exploring investment loan options, you'll need to choose between fixed and variable rates, or split your loan amount between both.
Fixed Rate Advantages:
- Rate protection during the fixed term
- Predictable repayments for budgeting
- Peace of mind with locked-in investor interest rates
Variable Rate Advantages:
- Flexibility to make additional repayments
- Access to offset accounts in most cases
- Potential to benefit from rate decreases
- Fewer restrictions on refinancing
Many property investors choose a split loan structure, combining both fixed and variable portions to balance security with flexibility.
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Interest Only vs Principal and Interest
When structuring your investment property finance, you'll decide between interest only and principal and interest repayments.
Interest Only Investment Loans:
With interest only investment structures, you pay only the interest component for a set period (typically five years). This approach:
- Reduces monthly repayments
- Maximises cash flow for portfolio growth
- Enhances negative gearing benefits
- Provides more capital for additional investments
Principal and Interest Loans:
These repayments reduce your loan amount over time by paying both interest and principal. This approach:
- Builds equity faster
- Reduces overall interest paid
- Provides long-term financial security
The choice depends on your property investment strategy and whether you're focused on immediate cash flow or long-term equity building.
Understanding Investment Loan Features and Costs
When comparing investment loan products, consider these important elements:
Loan to Value Ratio (LVR)
Your LVR determines how much you can borrow relative to the property value. Most lenders require an investor deposit of at least 20% to avoid Lenders Mortgage Insurance (LMI). However, accessing your equity through an equity release from existing properties can help fund your investor deposit.
Tax Benefits and Deductions
Investment properties offer significant tax advantages:
- Interest charges are tax deductible
- Stamp duty can be claimed
- Property management fees and body corporate fees are claimable expenses
- Depreciation on building and fixtures
- Negative gearing benefits when expenses exceed rental income
Vacancy Rate Considerations
When calculating investment loan repayments, factor in potential vacancy periods. Your need for rental income to service the loan makes understanding local vacancy rates essential for sustainable portfolio growth.
How to Access Fixed Rate Investment Loan Options
ZARALEND provides access to investment loan options from banks and lenders across Australia, helping Victorian investors compare:
- Investment property rates from multiple lenders
- Different loan amount structures
- Various investment loan features
- Interest rate discounts based on your circumstances
- Rate discount opportunities through lender promotions
Our team can assist with your investment loan application, ensuring you understand all available property investor loan options and helping you select products aligned with your wealth-building objectives.
When to Consider Investment Loan Refinance
An investment loan refinance might be appropriate when:
- Your fixed rate period expires and current rates are higher
- You want to leverage equity from your existing portfolio
- You're seeking better investment loan features
- You need to release equity for additional property purchases
- You want to consolidate multiple rental property loans
Our Loan Health Check service can help identify refinancing opportunities that support your financial freedom goals.
Building Your Property Portfolio with Fixed Rates
Successful building wealth through property requires a strategic approach. Fixed rate investment loans can form part of a broader strategy that includes:
- Generating passive income through quality rental properties
- Leveraging equity to fund additional purchases
- Maximising tax deductions across your portfolio
- Managing investor borrowing capacity effectively
- Planning for borrowing capacity as your portfolio grows
The stability of fixed rates allows you to plan your next investment moves with confidence, knowing your repayment obligations for the fixed period.
Making the Right Choice for Your Investment Strategy
Choosing the right investment property finance structure depends on multiple factors including your risk tolerance, investment timeline, and portfolio goals. While fixed rates offer protection and certainty, they typically come with less flexibility than variable options.
Consider your overall property investment strategy: Are you focused on rapid portfolio growth, stable passive income, or long-term capital appreciation? Your answer will guide whether a fixed rate, variable rate, or split loan structure serves you better.
At ZARALEND, our experienced team understands the Victorian property market and can help you explore investment loan products tailored to your objectives. Whether you're purchasing your first investment property or expanding an existing portfolio, we'll work with you to understand your goals and present suitable options.
Call one of our team or book an appointment at a time that works for you to discuss your investment loan options and start building your property portfolio with confidence.