Property Investment Loans and Loan Fees

Property investment can be a compelling path to building wealth and securing your financial future. However, unlike buying your primary residence, investment properties require specialized financing – property investment loans. Understanding these loans and the associated fees is crucial for making informed investment decisions.

Investment Property Loans: The Basics

An investment property loan is a financing option specifically designed for purchasing a property that will generate rental income, appreciate in value, or be resold for profit. Unlike owner-occupied home loans, investment property loans typically come with higher interest rates and larger down payments. This reflects the increased risk lenders perceive with investment properties.

Key Considerations When Choosing an Investment Property Loan

While interest rates grab most of the attention, several other factors influence the true cost of your investment property loan. Here, we delve into loan fees, a crucial yet often overlooked aspect.

  • Establishment Fees: These upfront charges cover the administrative costs associated with setting up your loan. They can include application fees, valuation fees, and mortgage registration fees. Application fees can range from a few hundred dollars to over $1,000, depending on the lender. Valuation fees, typically borne by the borrower, cover the cost of getting a professional assessment of the property’s market value. Mortgage registration fees vary by state or territory and are typically a fixed percentage of the loan amount.
  • Valuation Fees: As mentioned earlier, valuation fees are incurred to obtain a professional appraisal of the property’s value. This assessment is crucial for the lender to determine the loan-to-value ratio (LVR) – the percentage of the property’s value they are willing to lend. A higher LVR typically translates to a higher interest rate.
  • Ongoing Fees: These include account keeping fees, annual charges, and potentially redraw fees (if your loan has a redraw facility). Account keeping fees are typically monthly charges for maintaining your loan account. Annual fees are less frequent but can add up over the life of the loan. Redraw fees are charged if your loan allows you to access a portion of your repayments, essentially treating your loan like a line of credit.

Minimizing Loan Fees

  • Shop Around: Comparing loan options from different lenders is essential. Rates and fees can vary significantly, and potentially thousands of dollars can be saved by negotiating a better deal.
  • Consider a Mortgage Broker: A mortgage broker can help you compare loan products from various lenders and negotiate on your behalf. Their fees are typically incorporated into the loan itself.
  • Package Deals: Some lenders offer discounts on establishment fees when bundled with other financial products like bank accounts or insurances. However, ensure the bundled products genuinely suit your needs before opting for them solely for a fee reduction.

Beyond the Fees

While minimizing loan fees is important, it shouldn’t overshadow other crucial factors like interest rates, loan terms, and features. A slightly higher interest rate on a loan with valuable features like offset accounts or flexible repayment options might be a better deal in the long run compared to a lower rate with limited features.


Property investment loans are a powerful tool for building wealth, but careful consideration of all costs involved is essential. By understanding loan fees and factoring them into your calculations, you can make informed investment decisions and position yourself for a successful property investment journey. Remember, a competitive interest rate is just one piece of the puzzle; a keen eye for loan fees can significantly impact the overall cost of your investment.