Investment Property Buyer Guide
Investment lending is assessed differently to owner-occupied loans. This guide explains how investment home loans work, what lenders look for, and how to structure your finance around your property strategy.
What is an investment home loan?
An investment home loan is a mortgage on a property you rent out rather than live in. Lenders assess investment loans differently to owner-occupied mortgages — typically at slightly higher interest rates and with stricter serviceability criteria, because the income from the property (rent) is treated as supplementary rather than primary income.
The key differences to an owner-occupied loan: rental income is assessed at a shaded percentage (usually 70–80%), interest-only repayment periods are available, and the loan can be structured to maximise tax deductions such as negative gearing.
Key features of investment loans
Interest-only (IO) repayments — pay only the interest for an agreed period (typically 1–5 years), keeping repayments lower and maximising deductible interest
Rental income assessed — most lenders include 70–80% of expected gross rent in your borrowing calculation; some specialist lenders go higher
Offset and redraw accounts — park surplus cash to reduce interest without losing access to funds, useful for active investors managing multiple properties
Portfolio lending — finance multiple investment properties; lenders vary significantly in how they assess and cap portfolio exposure
Negative gearing compatible — when your rental income is less than your loan interest and expenses, the shortfall can offset your taxable income (seek tax advice for your situation)
Cross-collateralisation option — some lenders allow you to use equity in one property to secure another, though this adds complexity and risk
How lenders assess your application
APRA has applied specific requirements to how banks assess and approve investment loans. Understanding these constraints helps you plan your strategy before you apply.
Higher assessment buffer — investment loans are stress-tested at a higher buffer rate than owner-occupied loans, which typically reduces your borrowing capacity
LVR caps — most lenders limit investment loans to 80–90% LVR; borrowing above 80% generally requires Lenders Mortgage Insurance (LMI)
IO period limits — interest-only periods are typically capped at 5 years; after expiry the loan reverts to principal and interest repayments, significantly increasing monthly outgoings
Rental income shading — only 70–80% of gross rental income is usually accepted for serviceability; this accounts for vacancy, management fees, and maintenance
Existing debt counted in full — your current home loan repayments are included in your serviceability assessment even if you have significant equity
Common investor profiles we help
First investment property
Already own your home and buying your first IP? We help you understand how to use your existing equity, structure the IO period, and choose lenders who assess rental income generously.
Growing a portfolio (2nd or 3rd IP)
Adding to an existing portfolio? We identify lenders who are comfortable with multiple investment properties and won't impose arbitrary caps on your portfolio size.
Negative gearing strategy
High-income earner using IO loans to maximise deductible interest? We find lenders offering the longest IO terms at competitive rates.
Positive cash flow investor
Targeting high-yield properties where rent exceeds outgoings? We find lenders who assess rental income at the highest shading and structure repayments to maximise monthly surplus.
SMSF property investor
Buying inside a self-managed super fund requires a limited recourse borrowing arrangement (LRBA). We connect SMSF borrowers with specialist lenders who understand this structure.
Refinancing an IO loan
IO period expiring and facing a jump to P&I repayments? We compare refinance options across 35+ lenders to extend your IO period, reduce your rate, or restructure your loan.
Documents you'll need
Valid photo ID (passport or driver's licence)
Last 2 years of personal tax returns and ATO Notice of Assessment
Last 2–3 months of payslips (PAYG employees)
Last 3–6 months of bank statements
Rental appraisal or signed lease for the investment property (if already known)
Existing loan statements for any properties you already own
Statement of assets and liabilities
If self-employed: 2 years of business financial statements and business tax returns
Things to watch out for
Cross-collateralisation — linking multiple properties as security gives the lender control over your entire portfolio; structuring loans separately gives you more flexibility
IO expiry risk — plan ahead for when your IO period ends; refinancing to a new IO term is common but not always available at the same rate
Negative gearing is not guaranteed — tax rules around investment properties can change; always seek advice from a qualified tax adviser
Vacancy risk — rental income is not guaranteed; ensure your cash flow can handle periods without a tenant
Portfolio lender limits — some lenders cap total investment lending by number of properties or total debt; plan which lenders you use early
Tax information on this page is general only — consult a qualified tax adviser for advice specific to your circumstances
Frequently asked questions
What is negative gearing?
Negative gearing occurs when your rental income is less than your loan interest and other deductible property expenses. The shortfall can be offset against your other taxable income, reducing your tax bill. Speak to a tax adviser about your specific situation.
Can I get an interest-only investment loan?
Yes. Most lenders offer IO periods on investment loans. IO keeps repayments lower and can maximise negative gearing tax benefits. After the IO period, the loan reverts to principal and interest — which significantly increases your repayments.
How does rental income affect my borrowing capacity?
Most lenders include 70–80% of the expected gross rental income in your borrowing assessment. This offsets the investment loan's repayments and improves your capacity. Your broker can identify which lender treats rental income most favourably for your situation.
What LVR can I borrow at for an investment property?
Most lenders allow up to 80% LVR for investment properties without LMI. Some will lend to 90% LVR with LMI. A larger deposit improves your access to competitive rates.
What is the difference between P&I and IO repayments for investors?
Principal and interest (P&I) repayments pay down your loan balance over time. Interest-only (IO) repayments cover only the interest, keeping repayments lower but not reducing the loan balance. IO is common for investment loans because it maximises cash flow and deductible interest.
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This article is for general information purposes only and has been prepared without taking into account your objectives, financial situation or needs. It does not constitute credit advice, financial advice or a recommendation. You should consider whether this information is appropriate for your circumstances and obtain independent advice where necessary. K&M Solutions and Services Pty Ltd (ACN 649 305 126) is not a credit provider and does not hold an Australian Credit Licence. Enquiries may be referred to licensed credit brokers or referral partners. Credit assistance, if required, is provided by appropriately licensed credit representatives or Australian Credit Licence holders. This platform does not provide credit approval, a credit offer, financial advice, or legal advice.
This article is for general information purposes only and has been prepared without taking into account your objectives, financial situation or needs. It does not constitute credit advice, financial advice or a recommendation. You should consider whether this information is appropriate for your circumstances and obtain independent advice where necessary. K&M Solutions and Services Pty Ltd (ACN 649 305 126) is not a credit provider and does not hold an Australian Credit Licence. Enquiries may be referred to licensed credit brokers or referral partners. Credit assistance, if required, is provided by appropriately licensed credit representatives or Australian Credit Licence holders. This platform does not provide credit approval, a credit offer, financial advice, or legal advice.