Loans for investment purposes need to be treated differently to home loans. First, it is likely that the investment loan will be tax deductible as it is a cost associated with funding an income producing asset. As such, the principle component has no tax relief, while the interest component may offset income for tax purposes. Therefore, if there is any non deductible debt, such as a home loan, then the investment loan should ideally be set to interest only until the personal debt is paid off.

All lenders recently changed their investment loan rate as a result of the new rules about Capital Adequacy Ratios introduced by APRA (Australian Prudential Regulatory Authority). As a result, some lenders can no longer accept new investment loans, others significantly increase the interest rate. This make choosing the right lender more important, as some non bank lenders are not as adversely affected as the main banks might be.