Investment property loans

How is an investment property loan different from a home loan?

Three ways, and each is set by lender policy rather than law.

It is priced higher

Investor loans are priced higher than owner-occupier loans, with a further premium for interest-only.

Only part of the rent counts

Lenders count only part of the expected rent when they assess you, to allow for vacancies and costs; the product pages do not publish the figure, but 70% to 80% of rent is the working range brokers see in lender credit guides.

Interest-only is capped

Interest-only terms are capped, usually at five years, after which the loan reverts to principal and interest. Every existing loan you hold is also assessed at a buffered rate, which is why the second and third property are harder to finance than the first.

Why the structure matters

Property investment remains one of the most popular wealth-building strategies in Australia. With the right loan structure, you can leverage borrowed funds to build a portfolio that generates rental income and capital growth while claiming significant tax deductions along the way.

Unlike owner-occupied loans, investment property lending is designed around cash flow optimisation and tax efficiency. Interest-only repayments keep your outgoings low during the holding period, while the interest expense itself is fully tax-deductible. This makes property investment accessible even to those who might not have large surplus cash each month.

A licensed broker who works investment lending structures the loan around your portfolio strategy. Whether you are purchasing your first investment property or adding your tenth, your broker compares rates across 50+ lenders to find the most competitive deal with the right features.

What rates, LVRs and interest-only terms do lenders publish for investors?

Checked against each lender's published investor page on 20 September 2026. Rates move with the cash rate and lender pricing; confirm the current figure with the lender or your broker before relying on it. Where a lender does not publish a figure the cell says so.

Interest-only or principal and interest?

One of the most important decisions for property investors is choosing between interest-only and principal and interest repayments. Each option has distinct advantages depending on your investment strategy and financial position.

Interest-only repayments mean you only pay the interest on the loan each month, without reducing the principal balance. On a $600,000 loan at 6.29%, your monthly repayment would be approximately $3,145 on interest-only, compared to around $3,714 on principal and interest over 30 years. That saving of $569 per month can be redirected to other investments, used to pay down non-deductible debt on your home, or held as a buffer.

The key tax advantage is that the entire interest amount remains deductible throughout the interest-only period. With principal and interest, the deductible portion shrinks over time as the balance reduces. Most lenders offer interest-only periods of 1-5 years, with the option to extend subject to reassessment.

Principal and interest repayments build equity faster and reduce the total interest paid over the life of the loan. This approach suits investors with strong cash flow who want to pay down debt and eventually own the property outright for maximum rental yield.

How does negative gearing work?

Negative gearing is a powerful tax strategy that allows property investors to offset losses from their investment property against other income. A property is negatively geared when the total expenses of ownership exceed the rental income received.

The rules changed for some purchases in 2026. For established residential property bought after 7:30pm AEST on 12 May 2026, from the 2027-28 income year a net rental loss can no longer be offset against wages or other income. It is quarantined instead: it can be used against rental income from any residential property you own and against residential capital gains, and whatever is left carries forward. New builds, and property you already held (or had contracted to buy) before that time, keep the existing rules.

Common tax-deductible expenses on an investment property include mortgage interest, property management fees, council and water rates, insurance premiums, repairs and maintenance, depreciation on the building and fixtures, and travel to inspect the property. For a typical investment property, these deductions can reduce your taxable income by $10,000-$30,000 per year.

It is important to understand that negative gearing is not a profit in itself, it is a strategy that works best when the property is also appreciating in value. The tax deductions reduce the holding cost of the property while you benefit from long-term capital growth. When you eventually sell, you will pay capital gains tax. Under the current rules, if you have held the property for more than 12 months, you receive a 50% CGT discount. From 1 July 2027, individuals, trusts and partnerships lose that discount on new growth: gains that build up from that date are taxed with the cost base indexed for inflation and a 30% minimum tax rate. The gain made before 1 July 2027 keeps the 50% discount whenever you sell, because the law treats a property held on 30 June 2027 as sold and bought back on 1 July 2027, with the tax on that earlier gain deferred until the real sale. Owners of eligible new residential dwellings can choose to keep the discount instead of indexation.

What LVR and deposit do you need for an investment property?

Loan-to-Value Ratio (LVR) requirements for investment properties are slightly stricter than for owner-occupied purchases. Most mainstream lenders allow up to 80% LVR without Lenders Mortgage Insurance, and up to 90% with LMI. Some specialist lenders will go up to 95% LVR for investors with strong serviceability.

For borrowers building a portfolio of multiple properties, portfolio lending becomes an important consideration. Traditional lenders may restrict the number of investment loans they will approve, or apply increasingly conservative serviceability assessments for each additional property. Portfolio lenders and non-bank lenders are often more flexible, assessing your entire portfolio holistically rather than each property in isolation.

Cross-collateralisation, where multiple properties are used as security for a single loan, is another option that can simplify lending but comes with risks. Standalone securities for each property generally keep more flexibility and reduce the risk if property values change.

How do you use equity to buy the next property?

If you already own a home or other investment properties, the equity you have built can serve as a deposit for your next purchase. Available equity is the difference between your property value and your current loan balance, typically up to 80% of the value.

For example, if your home is worth $800,000 and you owe $400,000, your available equity is ($800,000 x 80%) - $400,000 = $240,000. This could serve as a 20% deposit on a $1,200,000 investment property. A broker can arrange a top-up on your existing mortgage or a separate line of credit to access this equity, keeping the investment portion separate for clean tax deductions. The equity to buy an investment property guide works the numbers through.