Investment Loans: Everything you need to know

Your choice between fixed, variable, or split rate structures determines how much control you have over repayments, how you respond to rate changes, and how you use debt for tax planning.

Most criminal lawyers earning steady income from salary, private billing, or partnership distributions can access investment loan options with lender-specific features that suit different cash flow patterns. A fixed rate locks your interest cost for one to five years. A variable rate moves with the market and usually includes redraw or offset access. A split loan divides your borrowing between both structures so you hold some certainty and some flexibility at the same time.

Variable Rate Investment Loans

A variable rate investment loan charges interest that moves when the lender adjusts its pricing in response to Reserve Bank decisions or funding cost changes. Your repayment amount changes with each rate movement. Lenders typically allow extra repayments, redraw, and offset account access on variable products, which gives you options for managing surplus cash or paying down the loan faster if your billing increases.

Consider a criminal barrister who bills between $18,000 and $35,000 per month depending on trial work. A variable rate loan with an offset account lets them park surplus cash from high-income months in the offset, reducing the daily interest charge without losing access to the funds. When they need the cash for a tax bill or practice expense, they withdraw it directly. If rates drop, their repayment falls automatically without needing to refinance.

Variable loans suit borrowers who want the ability to pay down debt faster when cash flow allows, or who expect rates to fall and want to benefit from that movement without action. The risk sits with upward rate movement, which increases your repayment and reduces the net rental loss you can claim as a tax deduction under negative gearing rules (subject to the new restrictions from 1 July 2027 for properties acquired after Budget night).

Fixed Rate Investment Loans

A fixed rate investment loan locks your interest rate for a set period, usually between one and five years. Your repayment amount stays the same for the entire fixed term regardless of what the Reserve Bank does. Lenders charge a break cost if you repay the loan early, refinance, or make extra repayments above a small annual threshold, typically $10,000 to $30,000 depending on the lender.

Fixed loans suit borrowers who want certainty over their cash flow and tax position. If you fix at 5.89% over three years, you know exactly what your monthly repayment will be and what your net rental loss will look like for deduction purposes. You also know that if rates rise to 6.5%, your repayment stays unchanged.

The limitation is inflexibility. You cannot access redraw or offset features on most fixed rate products. If you want to pay the loan down faster, you are restricted by the extra repayment cap. If you need to sell the property or refinance before the fixed term ends, the break cost can be significant, particularly if rates have fallen since you locked in.

Split Rate Investment Loans

A split loan divides your total borrowing into two portions, one fixed and one variable. You might fix 50% of the loan at 5.79% for three years and leave the other 50% on a variable rate with offset access. You can choose any split ratio, though most borrowers use a 50/50, 60/40, or 70/30 allocation depending on how much certainty they want versus how much flexibility they need.

In our experience, criminal lawyers with variable income from trial work or private client billing often use a 60% fixed, 40% variable split. The fixed portion covers the base repayment with certainty. The variable portion with offset access absorbs surplus cash during high-income months, reducing the interest charge and giving them liquidity if a case settles or a client delays payment.

Split loans also let you stagger fixed terms. You might fix one portion for two years and another for four years, so that only part of your loan reverts to variable rates at any one time. This reduces the risk of your entire loan rolling off a fixed rate during a period of high variable rates.

The downside is slightly higher administration. You manage two loan accounts, each with its own repayment schedule and terms. Some lenders charge two sets of ongoing fees. If you want to adjust the split ratio later, you usually need to refinance or request a variation, which may involve costs.

How Interest Only Periods Work Across Rate Structures

Most investment loans offer an interest only repayment option for the first one to five years, regardless of whether you choose fixed, variable, or split. During the interest only period, your repayment covers only the interest charge. You do not reduce the principal balance, which keeps your repayment lower and maximises your tax deduction because the loan balance stays higher for longer.

After the interest only period ends, the loan reverts to principal and interest repayments unless you request an extension or refinance the loan. Your repayment increases because you are now paying down the loan balance over the remaining loan term.

Interest only periods suit criminal lawyers who want to minimise holding costs while building equity through capital growth rather than debt repayment. If your marginal tax rate is 47% including the Medicare Levy, every dollar of interest you claim reduces your tax by 47 cents, assuming the loss is fully deductible. Keeping the loan balance high increases the interest charge and the deduction.

The trade-off is that you are not building equity through repayments, only through property value increases. If the property does not appreciate or if rental income drops due to vacancy, your equity position stays static or declines.

How the 2026 Budget Changes Affect Rate Structure Decisions

From 1 July 2027, residential investment properties acquired after 12 May 2026 will be subject to restricted negative gearing, meaning rental losses can only offset other residential property income or capital gains, not salary or partnership income. The choice between fixed, variable, and split rates does not change your eligibility for this restriction, but it does affect how predictable your deduction is.

If you fixed your rate before 1 July 2027, you know exactly what your interest cost will be for the fixed term, which makes it easier to forecast your tax position even though the deduction no longer reduces your assessable income from legal work. If you are on a variable rate, your deduction amount moves with each rate change, which adds uncertainty to your tax planning.

For properties acquired before Budget night, the existing negative gearing rules still apply. You can claim the full rental loss against all income sources. In that scenario, a variable rate loan gives you more flexibility to manage the deduction by varying your offset balance or making extra repayments depending on your income in a given financial year.

Refinancing Investment Loans When Your Fixed Term Ends

When your fixed rate term expires, your loan automatically rolls to the lender's standard variable rate unless you take action. Standard variable rates are typically 0.30% to 0.80% higher than the discounted variable rate offered to new borrowers. Refinancing to a new lender or negotiating a new fixed or variable rate with your existing lender can reduce your interest cost and increase your deduction or reduce your net holding cost depending on your tax position.

Most criminal lawyers refinance investment loans every two to four years to access lower rates, release equity for further property portfolio expansion, or consolidate debt. The refinancing process involves a full application, valuation, and settlement, which usually takes four to six weeks. Some lenders offer cash back incentives or waive LMI if you are refinancing within their own product range.

If you are planning to acquire another property within six to twelve months of your fixed term expiring, it often makes sense to refinance onto a variable rate with offset and redraw rather than locking in another fixed term. This gives you flexibility to restructure your debt when you purchase the next property without paying break costs.

Managing Rate Risk Across Multiple Investment Properties

Once you hold two or more investment properties, you can use different rate structures across different properties to spread your exposure to rate movements. You might fix the loan on your highest-value property to lock in the largest repayment, and leave the loan on a lower-value property on a variable rate to maintain liquidity and offset access.

This approach works well when you are building a portfolio over several years. Each time you acquire a new property, you assess the rate environment and your cash flow position, then choose the structure that suits that point in time. You end up with a mix of fixed and variable loans across the portfolio, which reduces the risk of all your loans rolling off fixed terms simultaneously or all your repayments rising at once if variable rates increase.

The limitation is that managing multiple loans with different fixed terms, offset accounts, and repayment schedules requires more attention. You need to track when each fixed term ends, when each interest only period expires, and when each loan is due for refinancing or restructuring.

Choosing the Right Structure When You Apply

Your decision between fixed, variable, or split depends on three factors: your income stability, your cash flow surplus, and your view on future rate movements. If your income is consistent and you want certainty, a fixed rate works. If your income fluctuates and you want to park surplus cash in an offset, a variable rate works. If you want both, a split works.

Criminal barristers with irregular billing cycles often benefit from variable or split structures because they can use offset accounts to reduce interest costs during high-income months without losing access to the funds. Salaried criminal lawyers in the Director of Public Prosecutions or Legal Aid with stable fortnightly income often prefer fixed rates because their cash flow is predictable and they value certainty over flexibility.

Rate views are harder to predict. Fixing when rates are high can lock you into an expensive repayment for several years. Fixing when rates are low protects you if rates rise. Variable rates give you the benefit of any rate cuts without needing to refinance, but expose you to rate increases.

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