Investors are often more rate-sensitive than owner-occupiers, and with good reason. Investment loans usually carry higher rates, and every dollar of interest affects your cash flow. With four RBA rises in 2026, reviewing your investment loans is worth doing now.
Why investment rates are higher
Lenders price investment loans higher because regulators require them to hold more capital against them, and investor arrears can rise faster in a downturn. Interest-only investment loans usually cost more again.
The difference between lenders can be significant, which is why refinancing investment debt can save real money.
Example: $700,000 interest-only loan
| Current lender | New lender | |
|---|---|---|
| Rate | 6.89% IO | 6.39% IO |
| Monthly interest | $4,019 | $3,728 |
| Annual saving | about $3,500 |
That saving improves your cash flow immediately. Lower interest also means a smaller tax deduction, but you're still better off overall.
Interest-only periods ending
Many investors take interest-only for five years. When it ends, the loan switches to principal and interest over the remaining term, and repayments can jump sharply.
On a $700,000 loan at 6.89%, moving from interest-only ($4,019) to principal and interest over 25 years would lift the repayment to about $4,900, an increase of nearly $900 a month.
Options when IO ends:
- Apply for a new interest-only period with your current lender (requires assessment)
- Refinance to a lender that will offer a new IO period
- Switch to principal and interest and enjoy paying the loan down
Lenders assess IO extensions carefully, testing whether you could afford principal and interest repayments over the shorter remaining term.
Keeping your tax deductions clean
Interest is generally deductible if the borrowed money was used for income-producing purposes. When refinancing:
- Don't mix personal debt into an investment loan. If you add a car or holiday to your investment loan, that portion isn't deductible and it complicates your records.
- Keep investment and owner-occupied loans separate. Avoid cross-collateralising, where one property secures another's loan.
- Borrowing costs such as establishment fees and LMI on investment loans are generally deductible over five years or the loan term if shorter.
Speak to your accountant before restructuring.
Cash out for the next property
Refinancing can release equity to fund a deposit on another investment. Ideally, set up a separate loan split for the deposit funds, secured against the existing property but used for the new investment. That keeps the deductibility trail clear.
Note that APRA's debt-to-income (DTI) limit started in February 2026, restricting the share of new loans banks can write at six times income or more. Investors with several properties may find some lenders more cautious. A broker can find lenders with room.
Upcoming tax changes
From 1 July 2027, negative gearing will be limited to new builds for properties acquired after 12 May 2026, and the CGT discount will be replaced with indexation for gains accruing after 1 July 2027. Properties already held at the announcement are grandfathered for negative gearing. Refinancing an existing loan shouldn't affect grandfathering, but confirm with your accountant. Read Negative gearing and CGT changes from 2027.
Frequently asked questions
Can I refinance an investment loan with LMI waived?
If your LVR is 80% or under, LMI won't usually apply. Some professions can access waivers up to 90% LVR.
Will refinancing reset my interest-only period?
Only if the new lender approves a new IO term. It's not automatic.
Should investors fix?
It depends on your cash flow needs. Some investors fix part of their debt for certainty and keep part variable with an offset.
Holding investment debt? Call Finfident on 0424 545 654 for a portfolio review. We'll look at rates, IO terms and structure together.
This article is general information only and doesn't take into account your objectives, financial situation or needs. Figures, rates and scheme rules are current as at October 2026 and can change. Finfident Finance Brokers (ABN 94 679 280 801) is Credit Representative 569374 of Outsource Financial Pty Ltd (ACN 131 090 705), Australian Credit Licence 384324.