The Pros and Cons of a Fixed Rate Investment Loan

A fixed rate investment loan gives you certainty about repayments, and you pay for that certainty in flexibility. For Doncaster investors weighing up a purchase near the Westfield Doncaster precinct or elsewhere in the City of Manningham, the question is whether predictable cash flow is worth giving up some options.

The right answer depends on how tightly your budget is stretched and how long you plan to hold the property. Here is how the trade-off works.

What Are the Pros of a Fixed Rate Investment Loan?

The main advantage of a fixed rate is that your interest rate and repayments stay the same for the fixed term, so your budget is not exposed to rate movements during that period. That makes it easier to plan around rent, council rates, insurance and management fees.

Certainty is most valuable in the early years of owning an investment property. Rent may not yet be flowing, or you may be adjusting to a new loan amount. A fixed investment loan lets you set a repayment you can sustain without watching the cash rate. It also suits investors who are holding a property for the long term and want one less variable to manage.

What Are the Cons of Fixing Your Investment Loan?

The main drawbacks are that you will not benefit if rates fall, and you may face break costs if you exit the loan early. Selling the property, refinancing or switching lenders during the fixed term can all trigger those costs.

How break costs are calculated, and whether a fixed loan allows extra repayments or an offset account, is set by each lender and each product. Ask for those terms in writing before you commit. If you want to see what extra repayments could do on a variable loan, the extra repayment calculator is a useful starting point.

A variable rate loan can move up or down with lender decisions. It trades certainty for flexibility. A split loan lets you fix part of the loan and keep part variable.

Fixed Rate Investment Loan Repayments: A $600,000 Example

On an illustrative $600,000 loan at 6.75% p.a., interest-only repayments are about $3,375 a month, while principal and interest repayments over 30 years are about $3,892 a month. The rate is an example only and not a current offer.

Consider a Doncaster investor who wants steady cash flow and fixes the whole loan at that illustrative rate with a five-year interest-only period. For those five years, repayments sit at about $3,375 a month. When the interest-only period ends, the loan reverts to principal and interest over the remaining 25 years, which at the same 6.75% is about $4,145 a month. That is roughly $770 more each month.

If the rate stayed at 6.75%, the investor would know the figure in advance and could set aside the difference. But if the fixed term ends before the interest-only period, the repayment after the switch will depend on the new rate and could be higher or lower than $4,145. It helps to read about fixed rate expiry well before that date.

Interest-only keeps early repayments lower, but the balance does not fall, so you carry the full debt into the higher repayment years.

Does a Fixed Rate Change How Much You Can Borrow?

Fixing your rate does not avoid the serviceability test. Banks and other authorised deposit-taking institutions must assess new borrowers at an interest rate at least 3 percentage points above the loan rate.

That applies to residential investment loans as well. APRA also expects lenders to count no more than 80 per cent of expected rent, to allow for vacancies. Interest-only does not lift your limit, because lenders assess it on principal and interest repayments over the shorter remaining term. Non-bank lenders are not bound by the same buffer, but each lender sets its own policy.

A borrowing capacity check before you shop for properties shows what you can realistically target.

How Fixed Rates Interact With Negative Gearing and Tax

Interest on money borrowed to buy a rental property is generally deductible to the extent the property is rented or available for rent, and the principal part of a repayment is not. A fixed rate does not change those rules. It only sets how much interest you pay.

The treatment of rental losses depends on when you bought. Properties held at 7:30pm AEST on 12 May 2026 keep full negative gearing, as do eligible new builds. From the 2027-28 income year, net rental losses on established residential properties bought after that time can only be offset against other residential property income. Because of this, a fixed repayment you can comfortably cover from your own income is a safer plan than one that relies on a tax refund. Speak with your accountant about how this applies to your situation, as outcomes are not certain.

Is Fixing Right for Your Investment Loan?

Fixing suits investors who value certainty, expect to hold the property through the fixed term and do not need frequent extra repayments. A split loan suits those who want some certainty and some flexibility.

If you already hold a loan and are unsure whether to fix, refinancing can be a way to restructure. Weigh up any exit costs on your current loan first. Our local team at Premier Path Finance in Doncaster can compare options from lenders across Australia and talk you through the trade-offs.

Call one of our team or book an appointment at a time that works for you, and we will map out a fixed, variable or split structure that fits your goals.

Frequently Asked Questions