Fixed rate investment loans give you predictable repayments for a set period, which matters when your income includes penalty rates, overtime and shift loadings that can move around.
Police officers building a property portfolio face a specific challenge: your income is secure, but the components shift roster to roster. A fixed rate on your investment borrowing removes one variable while you hold a property that generates rental income. The trade-off is reduced flexibility if you want to repay faster or refinance before the fixed term ends.
Fixed rate terms and what they actually lock in
A fixed rate investment loan holds the interest rate steady for a chosen period, usually one to five years. Your repayments stay the same regardless of what the Reserve Bank does with the cash rate, and lenders cannot increase your rate during that window.
You choose the fixed term when you apply. A three-year fix gives you certainty through a full market cycle without tying you in for too long. Shorter fixes suit officers who expect a pay rise or plan to sell within two years. Longer terms make sense if you want to hold the property and rates are sitting low when you lock in.
Most lenders allow extra repayments up to $10,000 or $20,000 per year during a fixed period. Go beyond that limit and you pay break costs. Refinancing before the fixed term ends also triggers break costs, which are calculated using the difference between your fixed rate and the rate the lender can now charge on a loan of the same term. If rates have climbed since you fixed, the cost can run into thousands of dollars.
Interest only or principal and interest during the fixed period
You can fix an investment loan on either an interest-only or principal-and-interest repayment structure. Interest-only means you pay only the interest portion each month, which keeps repayments lower and maximises your cash flow.
Interest-only periods run for up to five years with most lenders, though some allow extensions. At the end of that period, the loan converts to principal and interest, and your repayments jump. If you have fixed the rate and fixed the interest-only term at the same time, you need to plan for what happens when one expires before the other.
In our experience, officers with multiple investment properties often use interest-only during the fixed period to free up cash for a deposit on the next property. The rental income covers most or all of the interest cost, and the negatively geared loss reduces taxable income under current rules. Once the interest-only term finishes, you switch to principal and interest or refinance to another lender offering a new interest-only period. That approach works while you are accumulating properties. Once the portfolio is complete, switching to principal and interest starts to reduce debt.
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The negative gearing quarantine and why fixing now still makes sense
From 1 July 2027, rental losses on residential investment properties purchased on or after 7:30pm AEST on 12 May 2026 can only be offset against other residential rental income or carried forward. You cannot use those losses to reduce tax on your police salary unless the property qualifies as an eligible new build.
Properties you held at 7:30pm on 12 May 2026, including those under contract at that time, are grandfathered. You can continue to negatively gear them under the existing rules until you sell. If you settled an investment property between mid-May 2026 and 30 June 2027, you can negatively gear it under the old rules until 30 June 2027, after which the quarantine applies.
Fixed rates still deliver value under the new system. Certainty around repayments matters whether or not you can claim the loss against your wage income. If you are holding a property for capital growth and relying on rental income to cover most of the cost, knowing your repayment will not increase for three years gives you breathing room to plan around the quarantine. The fixed rate itself is unaffected by the tax changes.
Officers buying new builds still have access to full negative gearing. If you are purchasing a newly constructed dwelling on previously vacant land, or a development that increases the number of dwellings on a site, you can offset rental losses against your salary under the new rules. Fixing the rate on a new build loan locks in both tax treatment and repayment certainty, which is why we are seeing increased interest in house-and-land packages and new apartment developments among officers building their first or second investment.
How lenders assess investment loan applications for police officers
Lenders add a serviceability buffer of 3 percentage points to the interest rate when they test whether you can afford the loan. If the fixed rate is 6 per cent, they assess your income against a rate of 9 per cent. That buffer has been in place since mid-2025 and applies to both variable and fixed rate applications.
From 1 February 2026, lenders also apply a debt-to-income cap. They can fund up to 20 per cent of new investment loans at a DTI of 6 times gross income or higher, measured separately from their owner-occupier portfolio. If your total debt across all properties exceeds six times your annual income, the lender may still approve your application, but it will count toward that 20 per cent cap. Larger lenders hit the cap faster and may decline applications that smaller lenders will still consider.
Police officers generally pass serviceability without difficulty because your income is salaried, documented on a payment summary, and includes allowances that most lenders treat as ongoing. Shift penalties, higher duties, and overtime are usually accepted at 80 to 100 per cent of the average over the past 12 months. Some lenders require two years of overtime history, others accept one. If you have recently moved from general duties to a specialist role with higher base pay, bring your promotion paperwork to show the increase is permanent.
Rental income is assessed at 80 per cent of the market rent to account for vacancy and maintenance. The lender will order a valuation that includes a rental assessment, or accept a letter from a property manager quoting the expected weekly rent. If you are refinancing an existing investment property that is already tenanted, bring the signed lease.
Split rate structures and how they reduce risk without losing all flexibility
A split loan divides your borrowing into two portions: part fixed, part variable. You might fix 50 per cent of the loan for three years and leave the other 50 per cent variable, or fix 70 per cent and keep 30 per cent variable.
The variable portion gives you flexibility to make extra repayments without break costs, and to access offset or redraw if the loan product allows it. The fixed portion gives you certainty on half or more of your repayment. If rates rise, the variable portion increases but the fixed portion does not. If rates fall, the variable portion drops and you can make extra repayments into that portion to pay down the loan faster.
Consider an officer who borrows for an investment property and expects to receive a payout from accumulated leave in 12 months. Fixing the full amount would mean paying break costs when the lump sum arrives. Leaving the full amount variable would expose the entire loan to rate increases in the meantime. Splitting the loan 60/40 fixed to variable lets the officer lock in certainty on the majority of the borrowing, then put the leave payout against the variable portion without penalty.
Some lenders let you fix multiple portions at different terms. You could fix one portion for two years, another for four years, and leave a third variable. That spreads your risk across different rate cycles and gives you options when each fixed term expires. The downside is administrative: you are managing three separate loan accounts, each with its own maturity date and its own set of conditions.
Refinancing a fixed rate investment loan and when the break cost is worth paying
Refinancing before a fixed term ends triggers break costs, which the lender calculates using the difference between your fixed rate and the wholesale cost of funding a loan for the remaining term. If you fixed at 5.5 per cent and rates have since climbed to 6.5 per cent, the lender is earning more from your loan than it would from a new loan of the same term, so the break cost is zero. If rates have fallen or stayed flat, the lender has lost the opportunity to lend that money at the higher rate you are paying, and the break cost recovers that loss.
Break costs are highest in the first year of a fixed term and decline as you approach maturity. A rough guide: if you are 18 months into a three-year fix and rates have dropped by 0.5 per cent, expect a break cost in the range of several thousand dollars. Your current lender must provide a break cost estimate if you request one in writing.
Refinancing is worth paying the break cost if the saving on the new loan outweighs the penalty within a reasonable period. Officers refinancing to access equity for a second investment property sometimes accept a break cost because the alternative is waiting another year or two and missing the purchase opportunity. If you are refinancing purely for a lower rate, calculate how long it will take the monthly saving to recover the break cost, and whether you could achieve the same outcome by switching the variable portion of a split loan instead.
If your fixed term is within six months of expiry, most lenders let you lock in a new fixed rate for the next period without waiting for the current fix to end. That avoids a gap where you revert to the variable rate, which is usually higher than a new fixed rate.
Portfolio growth and how fixing rates on multiple properties affects your borrowing capacity
Each time you add an investment property, your borrowing capacity for the next purchase drops because lenders assess the total debt servicing across your portfolio. Fixed rates do not change that calculation, but they do give you predictable repayments, which makes it simpler to model how much you can borrow for property two or property three.
If you hold two investment loans and both are variable, a rate rise increases your repayments on both loans at once, which reduces the surplus income available to service a third loan. If you have fixed one or both loans, the repayments on the fixed portions stay the same, and you can continue to build your deposit for the next property without worrying that a rate movement will reduce your borrowing capacity mid-way through your savings plan.
Lenders calculate rental income at 80 per cent of market rent and deduct the full loan repayment, including principal if you are on a principal-and-interest structure. Interest-only repayments during the fixed period increase your borrowing capacity for the next property because the monthly cost is lower, leaving more surplus income on paper. Once the interest-only period ends, your capacity drops unless your income has increased or you have paid down other debt in the meantime.
Officers expanding a portfolio often fix the first property, keep the second variable, and split the third. That spreads your exposure and gives you one loan you can repay faster if you receive a windfall or promotion. There is no single optimal structure, but locking in at least one loan removes some of the timing risk when you are managing multiple properties and planning the next purchase.
Call one of our team or book an appointment at a time that works for you. We will review your current income, your investment strategy, and the loan features that suit your roster and your timeline, then access investment loan options from lenders who understand police income structures and portfolio lending.
Frequently Asked Questions
Can I make extra repayments on a fixed rate investment loan?
Most lenders allow extra repayments up to $10,000 or $20,000 per year during a fixed period. Extra repayments beyond that limit trigger break costs, which can run into thousands of dollars if rates have fallen since you locked in.
How does the negative gearing quarantine affect fixed rate investment loans?
From 1 July 2027, rental losses on properties purchased on or after 7:30pm AEST on 12 May 2026 can only be offset against other rental income, not your salary. Fixed rates still deliver certainty on repayments regardless of the tax treatment, and properties you held before that date are grandfathered under the old negative gearing rules.
What is a split loan and when does it make sense for police officers?
A split loan divides your borrowing into fixed and variable portions. You might fix 60 per cent for certainty and leave 40 per cent variable for flexibility. This structure suits officers who expect a lump sum payment, want to make extra repayments without break costs, or prefer to spread risk across different rate cycles.
How do lenders assess rental income on an investment property loan application?
Lenders assess rental income at 80 per cent of the market rent to account for vacancy and maintenance. They will order a valuation that includes a rental assessment or accept a letter from a property manager. If the property is already tenanted, bring the signed lease.
When is it worth paying break costs to refinance a fixed rate investment loan?
Refinancing is worth paying the break cost if the saving on the new loan outweighs the penalty within a reasonable period. Officers often accept break costs when refinancing to access equity for a second property, because waiting another year or two means missing the purchase opportunity.
