Mortgages for UK Citizens

What Is A Tracker Mortgage?

Ever heard the term “tracker mortgage” and wondered what it means? If you’re an Australian homebuyer or homeowner, you might not be too familiar with this concept, since local lenders do not commonly offset it. 

So in simple terms – what is a tracker mortgage? It’s a home loan with a variable interest rate that moves in line with a specific benchmark (which is usually an official cash rate that the central bank sets). 

But the main difference here is that, unlike a normal variable loan where the bank can change rates whenever, a tracker mortgage follows the official rate exactly. For instance, if interest rates rise, a tracker loan’s rate goes up by the same amount – and if interest rates fall, the loan’s rate drops equally.

How Tracker Mortgages Work

A tracker mortgage is essentially a loan where your interest rate “tracks” an external reference rate (like the Reserve Bank of Australia’s cash rate) with a fixed margin on top. So this just means that the rate on your loan will either rise or fall in sync with that benchmark. 

For example, Auswide Bank introduced a tracker home loan quite a while ago in 2016 that was set at 3.99% p.a., and it even had a floor – the rate couldn’t drop below a certain figure even if the RBA cash rate fell to zero. The big benefit of this setup is transparency: whenever the RBA makes a move, your mortgage rate adjusts in step automatically.

Tracker Mortgages in Australia vs. the UK

Tracker mortgages are popular in some other countries, especially the UK. In Britain, a tracker mortgage usually follows the Bank of England’s base rate (their equivalent of the RBA cash rate) plus a set margin. 

Most UK tracker deals tend to last only for a certain term (commonly two or five years), after which the mortgage interest rate switches to the lender’s standard variable rate (SVR). 

In Australia, by contrast, tracker mortgages have been almost unheard of. As of 2016, such products were not offered by any of the major banks here. A few smaller lenders have tried them – for instance, that previous example we just gave of Auswide Bank launching a tracker loan – but they’re still very niche. 

Big banks have argued that there isn’t much demand and that trackers could be risky or costly to offer (since the bank must pass on all rate cuts). And to compensate, lenders often set the margin higher on a tracker, so the tracker rate mortgage might not even always be the cheapest deal around.

Tracker vs. Standard Variable vs. Fixed Rates

How does a tracker mortgage compare to other home loan types that most Australians go for? 

Standard Variable Rate Loans

This is the most typical Aussie home loan. The interest rate can move up or down, but it’s set at the lender’s discretion. Standard variable rates usually just follow the RBA’s movements, but banks often pass on changes only partially (and sometimes make independent moves). 

So put simply, a standard variable loan gives the bank flexibility to set rates as it wishes, whereas a tracker guarantees your rate will mirror an external index exactly.

Fixed Rate Loans

A fixed rate mortgage locks in your interest rate for a set period (such as, 2, 3 or 5 years). During that time your rate won’t change – you’re shielded if rates rise, but you won’t benefit if rates fall. 

Fixed rate mortgage deals definitely give you the more stable repayment option of the two types of loans we’re talking about right now. The downside is that there’s less flexibility: exiting a fixed rate deal early usually incurs an early repayment charge (a penalty fee). 

Tracker loans, being variable, usually don’t have such penalties, but of course their rate can change at any time. Ultimately, choosing between a fixed or tracker comes down to whether you value stability or the chance to take advantage of rate drops. Or if you can even find a tracker loan in Australia.

Things to Watch Out For with Tracker Mortgages

If you’re considering a tracker mortgagee, keep a few caveats in mind. First, pay attention to the margin above the official rate – if it’s high, the loan might not actually even be a bargain. A tracker isn’t automatically the cheapest option just because it follows the RBA rate; a large margin could make the interest cost higher than some regular variable loans.

Second, check if there’s a floor rate. Some tracker mortgages set a minimum interest rate for the loan. For example, a lender might specify that the rate won’t fall below 2.50%, so even if the RBA cash rate dropped to 0%, your interest rate could not go below that floor. A floor protects the lender but limits how low your rate can go.

Also, consider the loan features. Some tracker loans lack extras like offset accounts, though they may still allow extra repayments or redraws. So just make sure you can live without any features the loan doesn’t include.

Finally, we’d always recommend that you check for any fees. Trackers generally don’t impose big break costs like fixed loans do, but it’s worth confirming that there’s no hidden exit fee or early repayment charge in the contract.

How Rate Movements Affect Your Payments

Again, the main appeal of a tracker is that your monthly mortgage payments respond instantly to interest rate changes. If the RBA moves the cash rate, your lender will adjust your rate by the same amount immediately. 

If rates go down, your mortgage repayments will get smaller. If rates go up, your payments will increase by the same margin. This is great when rates are falling, because you see savings straight away. But obviously the inverse of this means it can sting when rates are rising – you need to be prepared for the higher costs. 

And remember, the RBA typically meets monthly (except January), so your rate could change several times a year. Be sure to budget with that potential volatility in mind.

Fixed or Tracker Rate: Which Should You Choose?

So, should you go for a fixed or tracker rate? If you prefer monthly payments that don’t change, a fixed rate is probably going to suit you better. If instead you want to ride the interest rate waves and benefit from any cuts, a tracker could be better. 

For example, if you plan to sell or refinance in a couple of years, a tracker gives you more flexibility since there’s no break fee. A fixed rate could tie you down unless you pay an early repayment charge to exit early. 

Just keep in mind through all this that you might not even find a reputable tracker loan to even invest in, but this is the logic you’d apply if you were applying for one in England, for instance, where these loans are a lot more common.

How Upscore Can Help

Upscore’s Finance Passport lets you easily compare mortgage options side by side for free, which makes the search process much simpler. If you’re exploring home loans, make sure you give it a try and find a deal that suits your needs!

Get your Finance Passport now!

What Is a Lifetime Mortgage?

In simple terms, a lifetime mortgage is a loan that lets you release equity – that is, access some of the value of your home as cash – while you continue living in it. It’s essentially a type of equity release product that’s quite popular in the UK, and in Australia it’s very similar to what’s known as a reverse mortgage. 

You usually need to be around retirement age (typically 60 or older) and own your home outright (or have only a very small existing mortgage) to qualify. The cash you get is yours to use as you wish, and importantly, it’s tax-free – since it’s money you’re borrowing and not just income earned.

How It Works

So how does it work? With a lifetime mortgage, you’re borrowing money against the value of your home, but unlike a traditional mortgage there are usually no monthly repayments required. 

That’s right – you typically don’t even have to pay back a cent or make any interest payments while you’re still living in the home. Instead, the interest accrues (piles up) on the loan over time and any unpaid interest just gets added to the loan balance. 

The loan, plus the rolled-up interest, is only repaid later – usually when you either:

• Sell the property
• Move into long-term care
• Pass away and your estate sells the house

At that point, the sale proceeds settle the debt. After the loan and interest are paid off, any money there that’s left over from the sale goes to you or your beneficiaries. 

The good news here is that you still retain full ownership of your home throughout; the loan is just secured against the property as collateral. In other words, you get to stay in your home for life, and the lender’s security is that eventually the house will be sold to repay what you owe.

Lump Sum vs Drawdown Equity Release

Lifetime mortgages also have a bit of flexibility in how you take the cash. You can usually receive the funds as a lump sum all at once, or just set up a drawdown facility to release equity gradually in smaller chunks as needed. 

Some people are always going to take the lump sum option to, say, renovate their home or help the kids out early with an inheritance, but you’re generally going to see people opt for a regular supplemental income to boost their retirement lifestyle. 

Either way, you’re tapping into your home’s value. And because you’re only charged interest on the amount you’ve actually taken, a drawdown (taking money in stages) can save a good amount on interest compared to taking a big lump sum upfront. 

Interest and Loan Growth

Now, you might be wondering: what’s the catch? A lifetime mortgage (or reverse mortgage) isn’t exactly free money – it’s still just a loan with interest. Since you aren’t making monthly repayments, the interest will keep compounding for as long as the loan runs. So that means the amount you owe grows over time. 

Also, the interest rates on lifetime mortgages are usually a bit higher than the rates on regular home loans. 

Fixed Interest Rate for Life

Oftentimes, the rate is a fixed interest rate that’s set for life – this gives you some certainty about how the interest adds up, but it tends to be a bit more than a normal variable mortgage rate. 

Over, say, 10 or 20 years, a higher rate and compounding interest can significantly reduce the equity you have left in the home. So in practical terms, that means there might be a bit less value left for you or your family when the house is eventually sold. Go into this realising it’s a trade-off and that you’re getting cash now in exchange for giving up some of the home’s value later.

Your Protections

The good news is that any reputable lifetime mortgage comes with a negative equity guarantee. This feature has actually been a legal requirement for reverse mortgages in Australia since 2012, and it ensures that you (or your estate) can never owe more than your home’s value. 

In other words, even if the property market dips or you live a very long time and the interest just keeps growing, neither you nor your heirs will be lumbered with a debt that’s way beyond the value of the house. 

And when the house is sold, if by some chance the sale price doesn’t cover the entire loan and interest, the lender must absorb the difference – they can’t ask your family or estate to pay the rest. So you do have a bit of peace of mind there.

On the other hand, if the house sells for more than what’s owed, the extra proceeds still go to your estate. Also, you’re generally protected from ever being forced out of your home – as long as you uphold basic obligations like keeping the house insured and in reasonable condition, you have the right to stay there for life or until you choose to leave.

Inheritance and Estate Value

Try to also think about the impact on what you leave behind. Because the loan will eat into your home equity, there will be less value in the property to pass on to your heirs. Some people out there don’t mind using some of their kids’ inheritance to fund a more comfortable retirement (after all, it’s your money tied up in the house), but it’s something you might obviously want to think about. 

Australia doesn’t have inheritance tax, but it will still reduce the net value of your estate. However, remember that your children or beneficiaries will only miss out if the loan plus interest ends up consuming most of the house value. 

If your home continues to rise in property value, it might still sell for more than the loan amount, and any surplus goes to your family. Many lifetime mortgages also allow you to protect a portion of your property’s value as a guaranteed inheritance (this can be arranged at the start if you wish, by limiting how much you borrow). 

So just find a balance you’re comfortable with between enjoying your money now versus leaving it for later.

Early Repayment Options and Charges

You might also wonder, can you pay the loan early if your plans change? The answer is usually yes, you can choose to repay a lifetime mortgage early by selling the house or using other funds, but there could be early repayment charges depending on your contract. 

These loans are designed to last a lifetime (hence the name), so lenders sometimes charge a fee if you break the agreement in the early years. And that’s why it’s so important to check the terms. 

Some products are more flexible and might not penalise early payoff after a certain period, or they may let you make partial repayments without full closure. Additionally, some homeowners opt to pay the interest voluntarily (say, monthly or yearly) even though they don’t have to – this way, they keep the debt from snowballing too much. 

That’s optional, but it can be a smart move if you can afford it, because it means you’ll be preserving more equity in the long run. Overall, you have options to manage the loan if your situation evolves, but always be clear on any conditions.

How Upscore Can Help

Upscore’s Finance Passport helps you explore your borrowing options – internationally or locally – for free and shows how your financial background could get you a loan. 

Get started with Upscore Today!

Can You Get a Mortgage With Bad Credit?

So, can you get a mortgage with bad credit? Obviously, it’s everybody’s goal at some point to own a home, but we get that not everyone’s been blessed with a smooth financial life and may have made some poor financial decisions over the years that have resulted in bad credit.

Fortunately, the reality is that you can, but it usually takes a bit more effort and creativity since it’s definitely not going to be as easy. 

In Australia, lenders will definitely pull your credit file when you apply for a home (mortgage), so they see everything: 

• Your credit scores
• Any missed payments
• Defaults
• Any active credit cards or loans

Lenders literally use your credit rating to decide whether to lend you money. So, what are your options here?

Why Non-Bank Lenders and Mortgage Brokers Matter

Banks and building societies tend to shy away if your credit history is fairly rocky, which should be expected. That said, there are other home loan options available. For example, mortgage brokers and non-bank lenders often specialise in tougher cases where you can’t just go to a traditional bank. 

Brokers can facilitate bad credit home loans by finding a lender you wouldn’t be able to reach on your own. These specialists essentially take a “real-life” view of your finances and look beyond the credit score. 

So to put that simply, even with a poor credit score, a broker might find a lender willing to give you a shot if your situation has improved since back in the day and your other finances check out.

The Trade-Off: Higher Interest Rates and Risk Fees

Be prepared for a trade-off, though. Loans for borrowers with bad credit nearly always come with higher interest rates and extra fees. Bad credit home loans can be considerably more expensive than standard mortgages. 

A bad-credit home loan is basically a normal mortgage but with higher interest and fees attached. The rates are usually somewhere around 2-6% above the big banks’ current rates for the same deal.

So in practice, that means if prime borrowers are getting, say, 5% on a loan, you might be looking at 7% or 8% with a home loan with bad credit. And don’t forget risk fees or special insurance: with a higher loan to value ratio (LVR), lenders might tack on a risk fee instead of the usual Lender’s Mortgage Insurance (LMI). For example, at 90% LVR (just a 10% deposit), you could face a 1.5% risk fee on top of the higher rate.

That’s clearly quite heavy, but on the positive side, these loans often require less paperwork. Standard banks might demand strict documentation, but bad-credit lenders sometimes relax some rules. 

That said, less paperwork doesn’t exactly mean no requirements. You’ll still need a genuine deposit (often 10-20%) and proof of income and savings. Some lenders even let borrowers apply with only a 5% deposit on some products – essentially a 95% LVR – if the rest of their finances are solid. But more commonly, having at least 10-20% down will make lenders much happier.

Cleaning Up Your Financial History Before You Apply

Whichever lender or broker you use, get ready for scrutiny of your financial history. They’ll want to see that the mess in your credit past is behind you. So this means clean, “good” bank statements (no unexplained large overdrafts or missed bills), and that you’ve been paying any current loans or credit cards on time.

Lenders love to see that you pay your credit cards off in full each month and keep debts in check. Showing that you’ve consistently handled your day-to-day finances well can convince them that you’ve turned a corner.

Reduce Credit Inquiries

Also, remember that credit reports often include small marks that might surprise you – for example, applying for credit (like a credit card or car loan) will appear as a loan application enquiry on your report. 

If you’ve applied around the time you apply for a mortgage, it could look like more risk. A credit enquiry (even a loan application) is listed on your credit report and stays there for years. So it pays to space out applications and clean up any old issues.

Before you start shopping for that bad-credit mortgage, take a moment to improve your standing where you can. Even a few on-time payments on a small personal loan can raise your profile. Fix any errors on your credit report (you have a right to get mistakes corrected for free).

And yes, start saving as much deposit as possible – a bigger deposit lowers your LVR and often results in better rates and fewer extra fees.

After Settlement: When and How to Refinance

If you do land a loan, plan to revisit it later. Many experts (and lenders themselves) suggest that you actually just grab the loan now and refinance once your credit score and financial situation improve. 

For example, you could use a bad-credit loan to buy now, then, after you’ve built up savings and a perfect repayment record, refinance to a cheaper loan. That way you get into the market sooner, despite the extra cost, and then switch out of the premium price later.

Using Comparison Rates to See the Real Cost

And to compare all these pricier deals, make sure you always check the comparison rate. In Australia, lenders must quote both the interest rate and the comparison rate – the latter bundles in most fees. 

The comparison rate is the “real cost” of the loan and is usually slightly higher than the headline rate. So if a broker shows you a 7% interest rate but a 7.8% comparison rate, that extra 0.8% is the fees and charges. Comparing loans by their comparison rates (rather than interest rates alone) is especially important when your credit score isn’t great, as it makes sure you’re not getting any shocks with hidden costs.

So, what’s the bottom line? Poor credit history or a poor credit score makes things harder, but doesn’t shut the door completely. A missed payment, default or bankruptcy will definitely raise eyebrows, but tons of Aussies have rebuilt after worse. 

Just explain what the issues were (in your own mind and possibly to the lender) then show evidence that the situation is better now – perhaps through improved income or by paying all your billab ng time for the last year. Every lender is different. Some big banks might simply refuse, but many non-bank lenders will weigh these “explanations” seriously.

Why Non-Bank Lenders and Mortgage Brokers Matter

Get a broker involved, and you might find lenders who pre-vet your file upfront. In fact, brokers often offer free credit checks – they’ll spot things like bounced credit card payments or late utilities and suggest what to fix. 

As mentioned earlier, some of those lenders typically only work through brokers and deliberately help borrowers who’ve had trouble.

If you have any family who can act as guarantors or co-signers, that’s also an option. A guarantor (say a parent) can let you borrow at a higher LVR without paying LMI, and gives the bank extra comfort. 

How Upscore Can Help

Ready to check out loans from multiple lenders and get more home loan options? Sign up for Upscore’s Finance Passport today and boost your chances of securing the home loan you want.

Get started now!

Are Mortgage Rates Going Down?

Regardless of the reason, we can all appreciate that interest rates have been surging throughout Australia for a bit too long now, but are mortgage rates going down at last? 

Some of the early signs we’ve had in 2025 this far would indicate that they genuinely are. For instance, on the 20th of May 2025, the Reserve Bank of Australia (RBA) cut the cash rate by 25 basis points to 3.85%, which was actually its first reduction in years. 

The RBA noted that inflation has “fallen substantially since the peak in 2022” and growth was well below targets. So with inflation being back towards the 2-3% target and the economy sluggish, financial markets quickly began pricing in further rate cuts. 

So, what does all that mean? In short, many economists now see the RBA shifting into easing mode for the rest of 2025.

Cash Rate Movement in 2025

Over the last few months, the RBA have made it public that they plan on, albeit cautiously, pivoting. Governor Michele Bullock described the May move as a “cautious” rate cut, noting the Board had even considered a larger cut but chose to move carefully.

Observers point out that inflation has eased significantly and is expected to return to the 2-3% range a lot sooner than we all initially thought, while GDP growth remains weak. Some analysts are forecasting the cash rate to reach about 3.6% by July, with another 25bp cut in August. 

In effect, Reserve Bank policy has shifted from tightening to a much more gradual easing plan (The RBA is the sole issuer of monetary policy). 

So if inflation keeps falling and the economy stays soft, markets expect the RBA to cut again later in 2025. We’ll get into what kinds of impact this can have shortly.

Passing on the Cuts

As to be expected, a lot of the big lenders out there moved pretty fast to match the RBA. On the same day, the 20th of May 2025, NAB announced it would cut its standard variable home loan rate by 0.25% (effective from the 30th of May). Within hours, Commonwealth Bank (CBA) said it would also cut its home loan variable rates by 0.25% (effective from the 30th of May), and ANZ announced the same 0.25% reduction. 

Westpac followed suit, cutting its variable home loan rates by 0.25% for both new and existing borrowers (effective from the 3rd of June). Even Macquarie Bank lowered its variable home loan rates by 0.25% from the 23rd of May. You get the picture. In effect, nearly every major mortgage lender passed on the RBA’s rate cut to customers, but what does that entail?

Effect on Monthly Repayments

The good news is that these cuts translate into real dollar savings on monthly repayments. For example, CBA estimated that a 0.25% cut saves about $80 per month on a $500,000 owner-occupier loan under principal-and-interest repayments.

Larger loan amounts, of course, save more per basis-point: a 0.25% cut on a $600,000 loan would save roughly $100 per month. After two consecutive cuts, CBA noted many homeowners will “start to see a more meaningful change month to month” in their budgets. In other words, for average Australians carrying large home loan balances, even a quarter-point cut frees up hundreds of dollars each month.

Fixed vs Variable Mortgages

Most borrowers focus on variable-rate mortgages because those move with the cash rate. But fixed rate mortgages have been adjusting, too. Some banks actually cut fixed deals in anticipation. 

In early 2025, Macquarie cut its 1- to 3-year fixed home loan rates by up to 0.16%, which naturally made them very competitive. In fact, many lenders now advertise lower fixed rate promotions than a few months ago. 

If you have a fixed-rate loan now, your rate won’t change until that fixed term ends. But when your fixed term rolls off or if you take a new fixed-rate deal, you’ll find it set at a lower interest rate than before (be sure to compare principal-and-interest vs interest-only options and note the comparison rate whenever you’re looking at any fixed offer).

Exploring Your Options – What It Means for Borrowers

All things considered here, the trend is overall pretty good for borrowers. Lower interest rates means smaller monthly repayments on new and existing loans. That said, you’ve still got to compare the whole-of-loan cost, not just the headline rate. 

Fortunately, Australian rules require lenders to display a comparison rate that includes most fees, along with a comparison rate warning. For example, CommBank’s disclosure notes: “Comparison rate is true only for the examples given and may not include all fees and charges”. 

So this warning basically just reminds us that these advertised rates may exclude certain fees, and that two loans with the same nominal rate can have different total costs once things like fees and loan term are factored in.

Using Comparison Tables and Product Documents

When you’re thinking about choosing a home loan, try to take full advantage of some of the tools you have available. Many websites offer comparison tables that line up standard variable and fixed rates across lenders. 

These tables are a solid way of spotting low advertised rates quickly. But after that, dive into each loan’s detail – look at the product information. Every home loan product has a Product Disclosure Statement (PDS) and a Target Market Determination (TMD) from the lender (the product issuer). 

These documents spell out details like:

• Who the loan is designed for
• Its fees and charges
• Its key conditions

The TMD in particular will highlight the typical borrower’s objective financial situation . In short, just make sure any loan matches your situation. Loan amounts and term length matter too – a lower interest rate on a large loan still means big payments, and vice versa.

Important Information and Disclaimers

Try to keep in mind here that everyone’s objectives and financial situation are different, so don’t just immediately take what we’re saying here as financial advice – it’s not. 

Always make sure you’re reviewing all of the important information provided by the lender before acting on anything. Read the product disclosure statement (PDS) and target market determination (TMD) for any loan you consider. 

Furthermore, we strongly recommend that you check the “Important Information” section of any of those documents for fees, and watch for any “comparison rate warning” or similar fine print. 

Opportunities for Existing Borrowers

With the RBA cutting its cash rate and most lenders now responding appropriately, the overall trend is toward cheaper home loans than a year ago. Good news!

Keep an eye on rate announcements – when banks cut rates, it often pays to lock in a lower rate or refinance soon after. To put all this simply, borrowers who are informed and compare loan options are always going to benefit the most when home loan interest rates go down.

How Upscore Can Help

Ready to secure a loan? You’ll be able to compare offers from different lenders when you use Upscore’s free Finance Passport service, which is a solid way of getting the best loan terms for your circumstances. This can be a real advantage, whether you’re refinancing your Australian home loan or buying property overseas.

Get your free Finance Passport today!

How Much Deposit Do I Need For An Investment Property?

We get that buying an investment property can be exciting – it’s a whole different process to buying somewhere to live and your mindset is completely different – but it still raises a few practical questions. 

In Australia, lenders generally expect a larger deposit on an investment home loan than on an owner-occupied loan. Typically, you’ll need around 20% of the purchase price as a deposit (an 80% loan-to-value ratio) if you want to avoid paying lenders mortgage insurance (LMI), which we’d definitely recommend you aim to do. 

Some lenders will accept smaller deposits if you pay for the insurance. For example, some offer loans with as little as 10% deposit – but you must pay LMI. LMI is essentially insurance for the bank if you default.

How Much Can I Borrow?

So one of the main things that affects your borrowing power is your deposit size. This, alongside your income and whatever equity you already have. In practice, a larger deposit generally means a larger loan amount. Just make sure your first step here is reviewing your finances and working out how much you can borrow and afford.

Getting Pre-Approval

After this, get a home loan pre-approval so you can effectively ‘lock in’ your budget. A pre-approval essentially gives you provisional credit approval and shows sellers that you actually have a budget and are serious. 

Since mid-2024, lenders have been a bit stricter on serviceability. And as a borrower, you’ll likely find that you qualify for smaller loan amounts than in earlier years. So it generally pays to be conservative: always ask yourself “how much can I borrow for investment property” in realistic terms. 

As a rule of thumb, the maximum loan amount is roughly the purchase price minus your deposit, but it’s subject to your ability to service the loan. Use online borrowing-power calculators (you can find one at Upscore) or a broker’s help so you know you’re not overstretching.

Loan Types and Repayments

Next, consider your loan structure. You can choose fixed or variable rates, and principal-and-interest (P&I) or interest-only repayment options.

Interest-only loans keep your monthly repayments lower at first, so this helps your short-term cash flow when the property is finally rented. That said, interest-only comes with a longer-term cost: you pay no principal for a time, so you end up paying more interest overall.

Comparing Loan Rates

In fact, over the life of an interest-only loan you’ll usually end up paying more interest than with a standard loan. APRA data shows interest-only loans were about 21.0% of new housing lending in mid-2024. 

And keep in mind that interest-only loans often carry higher interest rates than P&I loans, which just means a higher ongoing cost. If you choose interest-only, definitely plan for a jump in repayments later when the interest-only period ends. 

So, how do P&I loans compare? These have higher repayments from day one but pay off the balance a lot more gradually. That said, there’s not really one ‘best choice’ here – it depends on your goals: interest-only can maximise cash flow now, while P&I is better if you plan to pay off the loan faster. 

As always, read all loan terms and conditions carefully to understand rates, fees and limits before signing.

Cash Flow vs. Growth

So, after you’ve got a better idea of what loan type suits your needs the most, you’ve got to start thinking about your broader investment strategy. 

Are you after steady cash flow or long-term capital growth? It’s not exactly uncommon for investors to aim for both, but one of those often takes priority over the other. 

If cash flow is key, look for areas that have strong rental demand and decent yields. If growth is the goal, you might want to accept lower initial rent in exchange for a suburb that’s on the rise. 

Generally speaking Australian gross rental yields are moving all the time, so it’s to give you an exact figure of what to expect. That said, inner-city yields (e.g. Sydney, Melbourne) tend to be lower. 

That might sound a bit counter-intuitive, but because the property’s market value in these cities are disproportionately high compared to the rental income it can generate, the yield is actually a bit lower if you’re focused on short-term gains.

Always calculate whether expected rental income will cover your loan repayments and costs. If rental income is lower than your expenses, you’ll have negative cash flow (and rely on the tax offset we described).

Negative Gearing Benefits

Remember tax rules: in Australia you can generally deduct most property expenses (especially loan interest) against your taxable income. This means if your rent doesn’t cover your costs, that loss (a negatively geared situation) can often be used to reduce your tax, which is not a bad situation to be in. 

Negative gearing can therefore offset some of your shortfalls while you wait for capital growth. It’s actually pretty common for investors to accept short-term losses since they know they will get tax deductions and hopefully capital gains later.

Choosing the Property

Location and property type affect both deposit size and returns. For example, Sydney’s median house price is about $2.05M (mid-2025), so a 20% deposit would be over $400k. 

Brisbane’s median is around the $960k mark, so the deposit needed is much smaller. Also consider rental yield: inner-city apartments often yield under 4%, while houses in popular suburbs or smaller capitals tend to yield around 5% or more. 

So just decide whether you want to prioritise capital growth (often higher in major-city suburbs) or rental yield (sometimes higher in regional or emerging areas).

Tenant Perspective

Think like you’re the tenant who’s going to be living here: amenities matter. This means you need easy access to:

• Public transport
• Schools
• Shops

Brokers even suggest writing down what tenants want – “good schools nearby, parking spots and noise levels” are commonly cited factors. Take these into account as they’re almost always going to improve your rental income and reduce your risk of vacancies.

Upfront Costs

And don’t forget the other costs beyond the deposit:

• Stamp duty
• Legal and lender fees
• Building inspections
• Any initial repairs or renovations 

These all have to be budgeted for. If your deposit is under 20%, add the LMI premium to your budget as well. For example, stamp duty on an $800k property can exceed $30,000, so these costs really matter. Altogether, these expenses can add tens of thousands to the total.

Final Steps and Credit Readiness

Before you make an offer, get organised. Secure formal pre-approval so you know exactly how much you can borrow. Lenders will then scrutinise your entire financial situation, which includes:

• Income
• Debts
• Expenses
• Credit score

That’s why you should address any credit issues and assemble all your paperwork in advance. Also, read every loan’s fine print. Know whether the loan is fixed or variable or how interest is calculated (including what fees or limits might apply.

Finally, consider getting professional help. A mortgage broker who specialises in property investing can explain which lenders have flexible rules (for example on LVR or interest-only) and help structure your loan to fit your strategy.

How Upscore Can Help

Looking to make the lending process as streamlined as possible? Upscore’s Finance Passport is free to try, so signing up early can give you insights into your credit standing before you apply.

Get started today!

Mortgage Broker vs Bank Manager – Which Is Best for You?

Mortgage broker vs bank for home loan – which option is best? Both have pretty similar roles so we’re definitely not surprised by how common a question this is by most Australians, from first home buyers to property investors.

On one hand, working with a mortgage broker can generally just be quite convenient. Not to mention that it gives you the ability to compare loans from multiple lenders. On the other hand, walking into your local bank feels straightforward and familiar. You might not have that feeling like someone’s trying to make money out of you, either. So, how do you choose the right path for your financial situation?

Generally speaking, there’s not actually a one-size-fits-all answer here because both options have their pros and cons when it comes to factors like:

• Interest rates
• Loan choices
• Support
• Overall experience

Throughout this guide, we’ll look at the key differences – from rates and fees to the range of home loan products and long-term support – so any potential home buyers out there reading this can decide what’s best for them.

Working with a Mortgage Broker

A mortgage broker is like a home loan matchmaker. When you’re working with a mortgage broker, they do the legwork to find loan options from multiple lenders that suit your needs. Instead of being limited to one bank’s offerings, you get access to a variety of home loan products across different financial institutions. That’s the main takeaway. 

A good mortgage broker will understand your goals and overall financial situation, then use their network to find a deal that fits. The best part here is that brokers are typically free for you – they get paid by the lender, not by charging fees to you. In other words, you usually won’t pay any out-of-pocket broker fees for their service. 

So really, it’s no wonder nearly three-quarters of new home loans in Australia are arranged through brokers – many Aussies like the choice and convenience brokers give you.

Other Advantages

And on that whole scamming issue, brokers in Australia are actually legally required to act in your best interest. This means they must prioritise finding you the best home loan deal for your needs. 

This duty sets them apart from a bank lender, who isn’t held to the same standard. Keep in mind, though, brokers work with a panel of lenders – a wide selection, but not every lender in the market. And while it’s rare, an unethical broker might favour one lender that pays them more commission. However, the Best Interests Duty now in place is designed to prevent that by legally obligating brokers to put your needs first.

Simplicity

Using a broker can also make applying for a home loan much easier. They:

• Help gather your documents
• Fill out forms
• Handle the back-and-forth with lenders

If you’re a first home buyer feeling overwhelmed, a broker will walk you through each step in plain English. And if you’re an investor, a broker can save you heaps of time – many property investors rely on brokers to compare loan options and juggle multiple lenders for them.

Extra Support

Another big plus is the ongoing support. A broker’s job isn’t over once your loan settles. Down the track, they can check your loan and make sure your rate stays competitive. In fact, brokers often help you refinance or switch loans later if it benefits you. 

It’s a long-term relationship, not just a one-off transaction. Of course, choosing a mortgage broker you trust is key – you want someone in your corner for the long haul.

Working with a Bank Lender

Going directly to a bank is the traditional way to get a home loan. The one you probably have in your mind as the default option. If you walk into your bank to apply, you’ll deal with a bank lender (basically a loans officer or bank manager). 

This means working with one financial institution and its own suite of home loan products. The bank can’t offer you loans from other lenders – only what they sell in-house. So you won’t get the same breadth of choice you’d have with a broker. 

However, many people still like going to their bank. Maybe you’ve been with them for years and feel comfortable there. The familiarity can make the process feel simpler since the bank already has your details on file.

Other Advantages

Sticking with your bank can have other perks, too. It’s convenient to keep all your finances in one place – your savings, accounts, credit cards, and mortgage under one roof.

Banks also sometimes reward loyalty with perks like interest rate discounts or fee waivers on bundled products. And if you find a great deal elsewhere, your bank might even match it if you ask. There’s no harm in saying to them that you found a lower rate and asking if they could beat it. Often they’ll try, especially if you’re a valued long-term customer.

On the flip side, going direct means comparing loan offers falls on you. Your bank isn’t going to tell you if a competitor has a better deal. So if you stick with one bank, you’ll need to shop around yourself to make sure you’re not missing out. That can be time-consuming – you might have to contact multiple banks and collect loads of different quotes.

Also, bank staff don’t charge you to discuss a loan – the bank earns money from the loan’s interest rate and fees once you sign up. 

So in short, there’s usually no real difference when it comes to mortgage broker fees vs bank costs; you typically won’t pay any extra for the loan by using a broker instead of going direct. The two paths mainly differ in how many options you can see and who does the legwork.

Mortgage Broker vs Bank Manager – Which Is Best for You?

So how do you decide between the two? Think about what matters most to you: Do you want plenty of options and a guide to help you compare them, or do you prefer the simplicity of dealing with a bank you already know and trust? 

If you’re a first home buyer who needs extra guidance, a broker might be your best bet. But if you’re confident in your bank and like the idea of a one-on-one with a familiar bank manager, you may lean toward the bank.

For an investor with long term plans to build a property portfolio, a broker’s ability to tap multiple lenders can be a big advantage. On the other hand, if you already have a specific loan in mind from a particular bank, going direct might feel more straightforward.

You can even talk to both a broker and your bank and compare – there’s no rule against getting information from both. Ultimately, brokers vs banks each have their place. The “best” choice is whatever makes you feel most confident and gets you a good deal. That could be from the personalised touch and broad comparison a broker gives you, or the simplicity of dealing with your bank, it’s about what works for you.

How Upscore Can Help

Ready to make your home loan journey easier? Sign up for Upscore’s Finance Passport – a free tool that simplifies applying for a home loan and comparing lenders.

Get the best head start with Upscore’s Finance Passport today!

What is Mortgage Protection Insurance?

Lenders Mortgage Insurance (LMI): A Complete Guide