Variable rate investment loans carry ongoing fees that can eat into your rental return without you noticing.
Most lenders charge an annual package fee, a monthly account-keeping fee, or both. On top of that, you might pay valuation fees when refinancing, discharge fees when selling, and redraw fees if you need to access extra repayments. Some lenders waive these costs for larger loan amounts or investors with multiple properties, while others apply them regardless of your portfolio size. Knowing which fees are negotiable and which aren't makes a real difference when you're comparing loan products or deciding whether to refinance.
What ongoing fees apply to variable rate investor loans
Variable rate investor loans typically include an annual package fee of around $300 to $400 and a monthly account-keeping fee of up to $15. The annual package fee usually comes with a rate discount and access to features like offset accounts or free redraws. The monthly account-keeping fee is less common now, but some lenders still charge it on basic variable products that don't include a package.
Consider an investor in Parkdale who refinanced to a variable rate product with a $395 annual package fee and a 0.60 per cent rate discount. Over the first year, the package fee was more than offset by the interest saving from the discount. When the investor asked the lender to waive the fee after two years, the lender agreed, keeping the discount in place. That saved $395 each year going forward, which went straight into the offset account linked to the loan.
Some lenders also charge valuation fees of $200 to $300 when you apply to increase your loan amount or switch products during a refinance. If you're accessing equity to purchase another property, the valuation fee is usually capitalised into the new loan amount rather than paid upfront. Discharge fees range from $150 to $350 and apply when you pay out the loan or transfer it to another lender. These are one-off costs, but they add up if you refinance frequently or sell properties within a few years of purchase.
How lenders mortgage insurance affects your upfront costs
Lenders mortgage insurance is charged when your loan-to-value ratio exceeds 80 per cent. The premium is calculated as a percentage of the loan amount and increases on a sliding scale as the LVR rises. An investor borrowing at 90 per cent LVR will pay a significantly higher LMI premium than one borrowing at 85 per cent, even if the loan amount is identical.
LMI is a one-off cost, usually added to the loan balance rather than paid in cash at settlement. Some states also charge stamp duty on the LMI premium, which further increases the total. For example, an investor purchasing a unit near Parkdale's foreshore precinct with a 10 per cent deposit might face an LMI premium of several thousand dollars, depending on the loan amount and lender. That premium doesn't provide any benefit to the borrower and can't be claimed as a tax deduction in the year it's paid, although it may be deductible over five years or the life of the loan under ATO rules.
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If you're using equity from an existing property to fund the deposit on your next purchase, you may be able to avoid LMI by keeping the combined LVR at or below 80 per cent. Splitting your borrowing across two loans, one secured against the existing property and one against the new property, can also help you manage risk and maintain access to deductible interest on the investment portion. A broker can structure this for you and compare lenders that offer lower LMI premiums or waive certain fees for investment clients.
Rate discounts and package deals for property investors
Rate discounts on variable investment loans are tied to the size of your total borrowing with the lender, the LVR, and whether you take a package that includes an annual fee. Discounts typically range from 0.50 per cent to 1.00 per cent below the lender's standard variable rate for investors, but the advertised discount isn't always the one you'll receive.
Lenders assess each application individually and adjust the discount based on your deposit size, income, credit history, and the property type. An investor purchasing an apartment in a high-density building near the Parkdale train station may receive a smaller discount than someone purchasing a standalone house in the same suburb, because lenders apply higher risk weightings to units in buildings with more than 50 dwellings or certain construction types. The difference in discount can be 0.10 to 0.20 per cent, which compounds over the life of the loan.
Some lenders offer tiered package deals where a higher annual fee unlocks a larger rate discount, unlimited free transfers, and fee waivers on additional lending. If you plan to grow your portfolio, paying a higher package fee upfront can reduce your overall interest costs and give you more flexibility when accessing equity or adding properties. If you're holding a single investment property with no plans to expand, a no-frills variable product with a lower annual fee and a modest discount might deliver lower total costs.
Interest-only repayments and their impact on cash flow
Interest-only repayments are available on most variable rate investment loans for an initial period of one to five years. During the interest-only period, your repayment covers only the interest charged each month, leaving the loan balance unchanged. Once the interest-only period ends, the loan reverts to principal and interest repayments, which are higher because the remaining term is shorter.
Investors in Parkdale often choose interest-only repayments to maximise rental cash flow and direct surplus income toward other investments or paying down non-deductible debt like an owner-occupied mortgage. The interest on an investment loan is fully deductible against rental income, while principal repayments are not. From a tax perspective, keeping the investment loan balance high and paying down non-deductible debt first can accelerate wealth building, provided the rental income covers the interest and holding costs.
From 1 July 2027, changes to negative gearing rules mean that losses on established residential investment properties purchased after 12 May 2026 can only be offset against other residential property income, not against salary or wages. Properties held before that date and eligible new builds remain unaffected. If you're considering an interest-only loan on an established property purchased after the cutoff, the cash flow benefit is reduced for investors who previously relied on offsetting rental losses against their main income.
Offset accounts and redraw facilities on variable investment loans
An offset account linked to your investment loan reduces the interest charged each day by the balance sitting in the offset. If your loan balance is $500,000 and you hold $20,000 in the offset, you pay interest on $480,000. The full loan balance remains intact, preserving your tax deduction, while the offset balance reduces your interest cost.
Redraw facilities let you access extra repayments you've made above the minimum required amount. The main difference is that funds in an offset account remain separate from the loan and can be withdrawn at any time without affecting the loan balance or your deduction entitlement. Funds in redraw are considered part of the loan, and accessing them may trigger fees or require lender approval.
Some lenders charge a redraw fee of $20 to $50 per transaction, while others allow unlimited free redraws if you take a package. For investors who regularly move funds in and out, an offset account is usually the better option. For those who make occasional lump sum payments and don't need regular access, a free redraw facility can work just as well. Keep in mind that offset balances do not reduce your loan amount for the purpose of calculating the LVR under lender risk rules, even though they reduce your interest cost.
Switching lenders to reduce fees and access lower rates
Refinancing to a new lender can reduce your interest rate, remove ongoing fees, or give you access to features your current loan doesn't offer. The savings from a lower rate often outweigh the upfront costs of refinancing, especially if your current lender hasn't passed on recent rate cuts or you're paying above-market interest on a legacy product.
Before switching, compare the total cost of your current loan over the next two to three years, including the interest rate, annual package fee, and any other recurring charges, against the total cost of a new loan with a different lender. Include discharge fees from your current lender, application fees and valuation costs with the new lender, and any government charges for registering the new mortgage. Most lenders will cover some or all of your switching costs if your loan amount is above a certain threshold, typically $250,000 or more.
If you're within 12 months of the end of your interest-only period, refinancing before it expires can lock in a new interest-only term and avoid the jump to principal and interest repayments. A broker who works across multiple lenders can identify which lenders are offering the lowest rates for investors in Parkdale and structure the application to maximise your borrowing capacity and discount.
Call one of our team or book an appointment at a time that works for you. We'll review your current loan, compare your options across lenders, and help you decide whether refinancing makes sense or if your existing product is still competitive.
Frequently Asked Questions
What ongoing fees do variable rate investment loans typically include?
Variable rate investment loans usually include an annual package fee of around $300 to $400 and sometimes a monthly account-keeping fee of up to $15. Some lenders waive the monthly fee if you take a package, and the annual fee often comes with a rate discount and features like offset accounts or free redraws.
Can I avoid paying lenders mortgage insurance on an investment property loan?
You can avoid LMI by keeping your loan-to-value ratio at or below 80 per cent. If you're using equity from an existing property to fund your deposit, structuring your borrowing across two loans can help you stay under the 80 per cent threshold and avoid the premium.
How does an offset account reduce interest on a variable investment loan?
An offset account reduces the interest charged each day by the balance sitting in the account. If your loan balance is $500,000 and you hold $20,000 in offset, you pay interest on $480,000, while the full loan balance remains intact and your tax deduction is preserved.
When does it make sense to refinance a variable rate investment loan?
Refinancing makes sense when the interest saving and fee reduction over the next two to three years outweigh the upfront costs of switching lenders. If your current lender hasn't passed on rate cuts or you're paying above-market interest, refinancing can deliver ongoing savings and access to better loan features.
What is the difference between an offset account and a redraw facility?
An offset account keeps your funds separate from the loan and lets you withdraw them at any time without fees or affecting your loan balance. A redraw facility lets you access extra repayments you've made, but some lenders charge a fee per transaction and funds are considered part of the loan.
