Best Investment Property Loans: Interest-Only vs P&I Explained (Australia)

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Choosing the right investment loan structure can have a major impact on cash flow, borrowing power, tax deductions and long-term wealth. Across Sydney, Melbourne, Brisbane, Perth and Adelaide, investors are analysing whether Interest-Only (IO) or Principal & Interest (P&I) is the smarter choice — and the answer depends heavily on strategy, yield, and lender policy.

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This guide explains the best investment property loans in Australia, including how IO and P&I differ, which lenders offer competitive rates, and how Matcheroo AI recommends the ideal structure for your situation.

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Interest-Only vs Principal & Interest — What’s the Difference?

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Interest-Only (IO): Lower repayments, higher flexibility

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Interest-Only loans require you to pay only the interest for a set period (usually 1–5 years).

Benefits of IO for Investors

• Higher cash flow (significantly lower monthly repayments)

• Maximises tax-deductible interest for investment properties

• Allows investors to buy sooner or hold multiple properties

• Useful during construction or early investment years

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Drawbacks

• Rates are usually higher than P&I

• Loan balance does not reduce during IO period

• Some lenders restrict IO at high LVRs

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IO is extremely popular among investors in Sydney, Melbourne and Perth, where holding costs can be high.

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Principal & Interest (P&I): Lower long-term cost, higher repayments

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P&I loans require you to pay both interest + principal, reducing the loan balance over time.

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Benefits of P&I for Investors

• Lower interest rates (usually cheaper than IO)

• Improves equity position

• Better lender servicing (some lenders prefer P&I investors)

• Lower long-term interest cost

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Drawbacks

• Higher monthly repayments

• Reduced cash flow

• Harder for investors with multiple properties

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P&I is often favoured by long-term investors in Brisbane, Adelaide, Canberra and regional areas with stronger rental yields.

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Best Investment Loan Options in Australia

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Macquarie — Best overall for IO + strong rates

• Sharp IO & P&I investor pricing

• Accepts complex portfolios

• Fast approvals

• Very strong for Sydney & Melbourne investors

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NAB — Best major bank for portfolio investors

• Competitive IO rates

• Good servicing calculator

• Strong for multi-property borrowers

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CBA — Best for complex investment structures

• Accepts trusts, company borrowers

• Reliable for high-value metro properties

• Higher approval confidence

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Westpac / St.George — Strong IO policy

• Good for high-LVR IO

• Investor-friendly assessment

• Popular across NSW & QLD

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ING — Low-fee investor option

• Competitive P&I rates

• Good for long-term investors

• Clean PA YG applicants ideal

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Non-Banks (Pepper, Bluestone, LaTrobe)

• Great for non-standard income

• Flexible IO options

• Higher rates, but broader eligibility

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Which Structure is Best for Investors in 2025?

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Choose Interest-Only if:

• You want maximum cash flow

• You own multiple investment properties

• You need flexibility for renovations or future refinancing

• You’re in a high-growth capital city market

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Choose P&I if:

• You want lower interest rates

• You’re building long-term equity

• Your rental yield covers repayments

• You want better borrowing power with some lenders

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Cash Flow Difference: IO vs P&I

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Example on a $700,000 investment loan:

• P&I repayment: approx $4,200–$4,500/month

• IO repayment: approx $2,800–$3,100/month

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Investors often save $1,000+ per month choosing IO during the early stages of holding a property.

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How Matcheroo AI Finds the Best Investment Loan

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Matcheroo AI analyses:

• IO vs P&I repayment differences

• Rental income & tax outcomes

• Lender servicing calculators (all major banks)

• Cash flow impact

• Borrowing capacity per lender

• Growth vs yield of your suburb

• Portfolio size and debt strategy

• Property type (house, unit, townhouse, duplex, NRAS, SMSF, etc.)

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Matcheroo AI then recommends:

🟩 Best IO lender

🟩 Best P&I lender

🟩 Lowest investor interest rate

🟩 Highest borrowing power

🟩 Lowest total cost over 5–10 years

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It’s the simplest way to choose the right investment structure without guesswork.

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Summary — Best Investment Loans in Australia

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🥇 Macquarie — Best overall for IO + sharp rates

🥈 NAB — Best for multi-property investors

🥉 CBA — Best for complex ownership structures

⭐ ING — Lowest fees for long-term investors

⭐ Westpac Group — Strongest IO flexibility

⭐ Non-Banks — Best for non-standard income

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Whether you’re investing in Sydney’s Eastern Suburbs, Melbourne’s bayside, Brisbane’s inner ring, Perth’s growth corridors or regional Australia, choosing IO vs P&I matters — and Matcheroo AI helps investors choose the ideal structure instantly.