Last Updated: 8th May, 2024

Looking for a great loan package with great opportunities for tax deductions? A fixed rate interest in advance home loan may be the mortgage for you!

Loan Type Interest Rate Comparison Rate* Contact Us
Interest in advance 6.34% 6.94% Apply Now

*WARNING: This comparison rate is true only for the examples given and may not include all fees and charges. Different terms, fees or other loan amounts might result in a different comparison rate. Each comparison rate is calculated based on $150,000 over 25 years for a secured loan.

If you’re a property investor looking to get competitive interest rates and simplify your loan, read on to find out more.

What is an interest in advance home loan?

With an interest only in advance home loan, you are able to pre-pay the following years interest, allowing you to claim it as a tax deduction for the current tax period.

Receiving some of the interest back means that eligible investors will have more money in their pocket.

Who is this mortgage suitable for?

Interest in advance home loans are only available to people that have:

  • Investment loans – such as property investors and other people with these loan types. There is no point in pre-paying the interest on a loan if it isn’t tax deductible.
  • Refinancing – when you refinance, your loan can be switched to a fixed rate and to interest only repayments.

Note: You cannot pre-pay interest with a variable rate or a principal and interest loan as the bank cannot calculate your interest in advance.

When should I apply?

This type of mortgage is popular from April to June, with settlement of the loan in June.

By pre-paying the loan in June, borrowers are able to maximize the deductible interest in that financial year.

Don’t delay your loan application! The end of the financial year is a very busy time for mortgage lenders and as a result the banks with the lowest interest rates are often inundated with applications!

We recommend that you apply for your loan at the beginning of May with a settlement in June.

Apply for your mortgage now! Speak to us on 1300 889 743 or enquire online.

What are the discounts?

  • You can get a discount of 0.15% to 0.20% for paying the interest in advance.
  • You can combine this with an additional 0.15% to 0.20% professional package discount.
  • Your total interest rate discount can be up to 0.40%!
  • Larger discounts are available on any variable rate portion subject to the lender’s discretion.

We know banks that regularly have the lowest fixed rates, allowing you to rollover your loan each year, rather than having to refinance.

Talk to one of our mortgage brokers by calling us on 1300 889 743 or enquire online and we will call you back.

Fast approval and settlement!

To qualify for the tax deduction, next year’s interest must be pre-paid before the June 30th cut off date. However, some banks have lengthy procedures and complex lending criteria, often taking over a month to process your loan.

Luckily, we know lenders that can approve your application for an interest in advance home loan, in as little as a few days!

Some lenders also have a “FastRefi” process which prevents your current bank from delaying the refinance to a new lender.

This allows you to make the lump sum payment before the end of the financial year.

This way, when you lodge your next tax return, you will be eligible to receive attractive tax deductions on the interest paid.

Borrow to pay the interest!

Paying the fixed sum of interest in advance can be tough on your cashflow!

Lenders require this payment to be made in advance, and if you don’t have the funds then you can’t proceed.

However, we know lenders that will allow you to borrow the interest payable for the next year.

This way, you can free up your funds for other purposes.

To qualify to borrow the interest, most lenders require that you are borrowing no more than 80% of the property value including the interest for the next year.

However, with LMI you can borrow up to 95%.

If you want to gain the tax benefits in the current financial year, speak to us on 1300 889 743 or enquire online.

Which lenders have interest in advance home loans?

A variety of major banks and non-conforming lenders have interest only loans with advance payment options, including:

  • CBA – Commonwealth Bank Interest In Advance Fixed Rate Investment Home Loan
  • Bank Of Melbourne – Advantage Package Investment Home Loan
  • St. George – Standard Fixed Rate Investment Home Loan
  • Bank Of SA – Standard Fixed Rate Investment Home Loan
  • NAB – Business Options Interest Only Loan (Fixed Rate Interest In Advance)
  • Westpac – Fixed Rate Investment Property Loans – Interest Only in Advance
  • ANZ – Fixed Rate Interest in Advance Loans
If you would like to find out which lender on our panel can offer you the best loan and the most competitive interest rates, please speak to us on 1300 889 743 or enquire online and one of our mortgage brokers will get in touch with you.

How can an interest in advance loan save you money?

An interest in advance loan could help reduce the amount of tax you pay.

For example, Tim owns an investment property that generates, on average, $100,000 worth of income each year.

The loan on this property is $150,000, with variable interest payable at a rate of between 7-8.5% per annum. He has been making interest only repayments for the last few years.

He has just refinanced and is now on a rate of 6% for a fixed term of one year, with interest pre-paid in advance.

By refinancing he now has a better loan and by pre-paying his interest, his taxable income is now lower for this current financial year.

With a lower taxable income, he pays less tax, saving him thousands of dollars!

Benefits of an interest in advance home loan

  • Receive tax benefits on your interest in this current financial year.
  • Making the payments one year in advance relieves the financial pressure of having to make weekly or monthly loan repayments.
  • You can budget effectively for the following year.
  • Lock in a great fixed interest rate with additional discounts.
  • Simplify your payments into one annual repayment.
  • The fixed rate can be locked in for 1-5 years.

Disadvantages of an interest in advance home loan

Whilst this is a very competitive loan product, the additional repayments that can be made on the loan are restricted.

  • The loan also has less features and little flexibility.
  • As with other fixed rate loans, If you repay the loan early then you may also have to pay break fees.
  • However, you may also be eligible for a refund of some of the interest that you have pre-paid.

Which lender has the lowest rate?

Did you know some lenders have a discount if you pay the interest in advance?

You can save an additional 0.10% to 0.20% off of your interest rate simply by pre-paying the interest!

The banks do this because if the interest is pre-paid they don’t have a problem with their borrowers missing repayments.

Not every lender has special rates if you pre-pay your interest.

To find one that does, call us on 1300 889 743 or enquire online and our mortgage brokers will help find you the best deal based on your situation.

Additional interest rate discounts

By putting your loan in a professional package you can get additional interest rate discounts.

However, not every lender has professional package discounts for fixed rate loans.

Therefore, it’s important that before you consider applying for this loan product, you speak to a specialist to find out which banks offer the most competitive rates.

Speak to a financial advisor

It may be necessary to consult with your accountant or tax agent to get professional advice on your eligibility for a tax deduction.

This way you can gain sound advice on whether this loan product would suit you and your taxation requirements.

Do I need Lenders Mortgage Insurance?

You may be required to pay Lenders Mortgage Insurance (LMI) for loans of over 80% LVR (80% of the property value).

Contact us for an interest in advance home loan today!

If you wish to apply for a loan, please enquire online or call us on 1300 889 743.

We can help you get the most competitive fixed interest rate for your advance interest loan, saving you thousands of dollars and ensuring you get some great tax deductions.

Speak to our expert team today!