A variable rate investment loan moves with your lender's rate, so your repayments can rise or fall while you own the property. For a paramedic on a rostered income with overtime and penalties, that movement is the main thing to plan for before you sign.
What Is a Variable Rate Investment Loan?
A variable rate investment loan is a loan for a rental property where the lender can change the interest rate over time. Your repayments can move up or down with the lender's rate. The term stays the same unless you change it. The balance stays the same only during an interest-only period. On a principal and interest loan, the balance falls as you repay.
The rate on your loan is set by your lender. It is not the same thing as the RBA cash rate, which sits at 4.85% p.a. at the time of writing. Lenders set their own rates, and the gap between the two depends on the lender and the loan. For a property investor loan, the interest is generally deductible when the property is rented or genuinely available for rent. Speak with your accountant about how that applies to you.
One trade-off sits at the centre of this choice. If rates rise, your repayments rise too, and your rent may not rise by the same amount. A fixed rate gives you certainty, but how fixed loans handle extra repayments or offset accounts depends on the lender.
How Do You Calculate Investment Loan Repayments?
To calculate investment loan repayments, take the loan amount, the interest rate and the loan term, then choose between interest-only and principal and interest. Use your lender's rate or a calculator, and test a higher rate as well.
As an illustrative example only, take a loan of $500,000 at 6.75% p.a. Interest alone is $33,750 a year, or about $2,813 a month. That is the interest-only figure. On principal and interest over 30 years at the same 6.75% p.a., the repayment is about $3,243 a month.
The gap is about $430 a month. The interest-only option does not reduce the loan, so the full $500,000 is still owing at the end of the interest-only period. When it ends, repayments move to principal and interest over the shorter remaining term. If a 30-year loan has a 5-year interest-only period, the remaining term is 25 years. At the same 6.75% p.a. that would be about $3,455 a month.
For a more tailored figure, use the borrowing capacity calculator and test your own numbers. If you are weighing the structure, the interest only loans for paramedics page explains how that option works.
Does Interest-Only Increase What You Can Borrow?
No. An interest-only feature does not increase your borrowing capacity. Lenders that follow APRA's guidance assess interest-only loans on principal and interest repayments over the remaining term, which can lower the maximum loan size.
For a 30-year loan with a 5-year interest-only period, the assessment uses repayments over the remaining 25 years. If you want a higher loan amount, interest-only will not get you there.
APRA also requires authorised deposit-taking institutions, such as banks, to test new borrowers at a rate at least 3.0 percentage points above the loan rate. Non-bank lenders are not bound by that buffer, but each lender applies its own credit policy.
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How Is Rental Income Counted When You Apply?
Lenders generally count only part of your expected rent. APRA's guidance says prudent policies include a minimum haircut of 20 per cent, so no more than 80 per cent of expected rent is counted.
The haircut allows for periods when the property is empty. It does not cover management fees or maintenance, which still come out of your cash flow. Lenders also tend to rely less on a rental appraisal than on actual rent received, though the evidence each lender accepts differs.
Lenders will also assess your employment income, including how they treat overtime and allowances. A broker who knows ambulance pay structures can present that income clearly.
Negative Gearing for Paramedics Buying Now
The negative gearing rules changed in 2026, so the date you buy and the type of property both matter. Speak with your accountant before you commit.
Losses on residential investment properties held at 7:30pm AEST on 12 May 2026 stay deductible against other income, including your salary, until the property is sold. Losses on eligible new builds acquired after that date can also be deducted against all income.
For an established property bought after that time, the rule changes from the 2027-28 income year. Net rental losses can then be used only against other residential property income, including capital gains on residential property. Excess losses can be carried forward. Properties bought between 12 May 2026 and 30 June 2027 can be negatively geared under the current rules until 30 June 2027 only.
The change does not affect whether interest is deductible. It affects how a net rental loss can be used. Only the interest part of your repayment is deductible, and the principal part is not.
Using Equity and Offset Accounts on a Variable Loan
What you do with borrowed money decides whether the interest is deductible. Under ATO ruling TR 2000/2, each redraw or drawdown is treated by how the funds are used at that time.
As an example, consider a paramedic with a variable investment loan who redraws $20,000 to pay for a holiday. That redraw is a private use, so the interest on it is not deductible, even though the loan is secured by the rental property. If the same $20,000 had gone to repairs on the rental, the interest on that portion would generally be deductible. The outcome here is a loan with a mixed purpose, which makes records harder to keep and gives you a smaller deduction than you may have expected.
A safer approach is to keep personal spending away from the investment loan and talk to your accountant before you redraw. If you want to use equity in an existing home to fund a deposit, the equity release loans for paramedics page covers that route, and the debt recycling page covers another. Lending above 80 per cent LVR generally needs lenders mortgage insurance, and each lender sets its own caps.
An offset account lowers the balance that interest is charged on, so the interest incurred is lower. It does not reduce the loan balance. Whether a lender offers a full or partial offset is a product detail to check.
Refinancing an Existing Investment Loan
Refinancing means moving your investment loan to a new lender or a new loan. The aim is to improve the rate or structure, but there can be costs, and lenders set their own fees and rate discounts.
If your loan is some years old, it can be worth a review. A broker can compare the rate and features of your current loan with what is on offer across lenders in Australia. Check discharge fees, valuation fees and any break costs before you move. Our investment loan refinancing for paramedics page explains what we look at.
A loan health check is a quick way to see where your current loan sits before you decide.
Your Next Move
If you are buying your first rental, our buying your first investment property page is a good place to start. Call one of our team or book an appointment at a time that works around your roster, and we will map out a variable rate investment loan that fits your income.
Frequently Asked Questions
What is a variable rate investment loan?
It is a loan for a rental property where the lender can change the interest rate over time. Your repayments can rise or fall while you hold the loan.
Does interest-only help me borrow more?
No. Lenders assess interest-only loans on principal and interest repayments over the remaining term, which can lower the maximum loan size.
How much of my rental income will a lender count?
APRA's guidance says prudent policies count no more than 80 per cent of expected rent. Each lender sets its own rules on the evidence it accepts.
Is the interest on my investment loan tax deductible?
Interest is generally deductible when the property is rented or genuinely available for rent, but the principal part of a repayment is not. Speak with your accountant about your situation.
