How to choose the best investment property loan

7 minutes

These days, the media, your neighbour, and pretty much everyone else seem to be talking about interest rate hikes.

As a seasoned property investor, you’ve been checking your home loan rate and have shopped around online wondering if it’s time to switch to a better lender.

Or maybe you don’t own a property yet, but have saved enough for a deposit, have had capital gains, and are now ready to invest.

According to News, house prices could fall by 20 per cent across Australia in the next 18 months. Michael Yardney, one of Australia’s leading experts in wealth creation through real estate, believes that with the increase in rents and the reduction in first home buyers, strategic investors with a long-term view will return to the property market.

This is the opportunity to get into the market before it’ll go back up again. It’s only a matter of time. The graph below shows the growth of Australian property values over the last 20 years.

Source: Corelogic – Australian home values have grown 190.5% in the

If you’re into trends, have a look at the race to the top of Australian capital cities’ house prices in this real-time visualisation (it’s fascinating).

The mortgage landscape is rapidly changing and the market now offers solutions with features, speed of application and savings that were simply unthinkable a few years ago.

Whether you’re looking for the best loan for your current property or your next investment, don’t fall into the trap of only looking for the lowest rate.

A competitive rate is certainly important. But there are many other things to consider when looking for an investment property loan.

Let’s look at what they are.

Choosing the best investment property loan

Choosing a home loan simply based on its rate is like purchasing a car based on price only. Doing so will force you to sacrifice features and, ultimately, benefits.

Often, people believe they can compromise on space, safety, comfort and performance. It’s only when they get on the road that they realise their kids at the back are not comfortable, which makes for a hell of a ride! They find out the hard way their engine is too thirsty, they don’t have enough space for their things and their audio system doesn’t play their favourite tunes as it should.

Day after day, these minor frustrations add up and end up increasing their stress levels. That’s when the Shoulda Woulda Coulda track starts playing in their head and they wish they had made a better choice.

A home loan is very similar: sacrificing features for a low rate often results in more stress. Similarly, non-competitive rates or buying features you don’t need will increase your payments, which ultimately will create financial pressure, hence more stress.

The key is to find an investment home loan that strikes the balance between low rate, features you’ll use and little or no fees.

When choosing a mortgage for your investment property, look for the P.A.Y.O.F.F.

P – Process

The lender’s process is fast, hassle-free and secure.

A recent survey by PureProfile showed that over 70% of Australians waited between one to six weeks or more for their home loan approval.1

One in five Australians missed out on a property because of a delay in securing financing. And one in ten missed out more than once. 2 Yes, that’s just because of a lengthy and outdated loan application process.

At Nano, you get full approval in minutes, not weeks. The process is 100% paper-free and you can do it from your desktop, tablet or mobile whenever it suits you.

We safely connect to your bank to assess your financial information so you don’t have to supply payslips, bank statements and calculate your expenses manually.

We never see or store your personal bank account details. We use 256-bit encryption from end-to-end, so you can be sure your information is secure.

A – App

The app caters for all your needs.

These days, most lenders have an app, but let’s be honest, they’re often not that great. Can you easily manage your mortgage and keep track of your expenses? Can you receive your salary right into the app?

Nano’s app allows you to:

  • View and understand your money with visualised data
  • Track spending with real-time notifications
  • Categorise transactions and see details with merchant logos, map locations, contact info and more
  • Instantly send money to yourself or your loved ones with Osko
  • Pay your bills using BPAY from your offset sub-account
  • Schedule payments to payees with a BSB and Account number
  • Freeze and unfreeze your cards instantly.

Y – Your rate

Your rate is low.

Yes, we’ve said it: a low rate is not everything. But it’s still very important, especially considering the RBA have announced that RBA cash rate could reach 2.5 per cent by the end of the year.

So ensure you get a low rate that stays low for the duration of your mortgage.

The average Nano customer saves $60,000 over the life of their loan when refinancing.3

Plus, we commit to give new and existing customers the same fair low rates — with us you’ll never get honeymoon rates, or loyalty taxes.

O – Offset account

Your lender offers a free offset account.

Having an offset or offset sub-account helps you pay down your loan faster​. The balance in your offset account is used to offset the balance of your loan, which then reduces how much interest you pay.

But not every mortgage comes with an offset account and when they do, they rarely allow you to receive and send money from it.

Your Nano home loan comes with a free offset sub-account. We calculate interest daily and charge it monthly so the more you add (such as your salary and other funds), the more you save.

You can also budget and plan for the big things in life by tucking money away into vaults within your Nano’s offset sub-account.

You may have also heard of a redraw account. Like an offset account or sub-account, a redraw facility can help you reduce the interest you pay on your home loan. However, it’s not a separate account but a feature attached to your loan, which usually comes with limitations, such as minimum redraw amounts, inability to make everyday purchases with a debit card, or withdraw money from an ATM. There may also be different tax implications compared to an offset account. Unlike an offset account, a redraw account is not recognised for tax purposes (but chat to a tax expert for more advice on this).

F – Fees

You don’t pay unnecessary fees.

The cost of the property itself is just one of the many expenses investors need to consider. Then there are all the fees associated with the purchase, such as stamp duty, conveyance, solicitors, building inspections, etc. You also need to consider the costs of running the property: real estate fees, strata, water and council fees, landlord insurance and more.

With such a long list of outgoings, every dollar counts. So it’s important to cut out unnecessary fees when possible.

Unlike most lenders, Nano doesn’t charge fees.

We have:

  • No application fees
  • No account fees
  • No transaction fees
  • No usage fees
  • Simply no Nano fees

The same applies when you refinance. With us, there are no application, monthly or annual fees; no offset sub-account, valuation or settlement fees; no Nano discharge fee.

$0. Simple, right?

F – Flexibility

The loan structure is flexible.

What’s your strategy? Principal and interest or interest only? Single or joint application? Make sure your home loan keeps all the options open for you.

Later down the track you might want to build a property portfolio and adopt a cross-collateralisation strategy. This is where you can use the equity of a property you already own as a security to purchase a new property, instead of a sizeable deposit, which can help with your cashflow.

With cross-collateralisation you may not have to find excess cash lying around to purchase an investment property. Instead use the equity in your existing property to fund it. Sometimes, you could even secure a better owner-occupied rate if you bring the home you live in across as security because the property will be cross-collateralised with your investment properties.

Nano will soon offer cross-collateralised loans. So you can use the equity from an existing Nano loan to purchase your next property.

There are also tax benefits to take advantage of, but it’s a complex strategy. So make sure you consult your financial advisor before going ahead.

Nano. A better loan for your investment property

Forget lengthy applications and pre-approvals. Nano offers investors like you complete confidence with full approval in minutes, not weeks, and low rates with no fees^.

Packed with features you actually need, Nano’s all-in-one home loan is a fast, efficient and flexible solution to help you save.

Find out how much you can save with Nano’s Refinance Calculator.

  1. Source: Pureprofile Survey of 1,000 homeowners, April 2022
  2. Source: Pureprofile Survey of 1,000 homeowners, April 2022
  3. $60,000 is the average interest savings Nano customers have saved over the life of their loan by switching to Nano as of June 22.

^ While Nano does not charge any fees, government charges still apply.