Using a mortgage broker for an investment property
An investment property loan is assessed differently from a home loan: lenders count only part of the rent, price investor loans higher, and cap interest-only terms. A mortgage broker who works with investors knows which lender's policy suits your income, your existing loans and how many properties you plan to hold, and structures the loan so the deductible debt stays separate from your home loan.
- Lenders typically count only 70% to 80% of expected rent when assessing what you can borrow; the shading and the assessment rate differ by lender
- Investor loans carry a rate premium, and interest-only is usually capped at five years before reverting to principal and interest
- The structure matters for tax: investment debt must be kept separate from the home loan, usually with a split or a second facility, never mixed in one redraw
- Serviceability tightens with each property because every existing loan is assessed at a buffered rate; a broker knows which lenders assess existing debt at actual repayments
- Free to borrowers; the lender pays the broker on settlement
WARNING: This comparison rate is true only for the example given and may not include all fees and charges. Different terms, fees, or other loan amounts might result in a different comparison rate. Comparison rates are based on a secured loan of $30,000 over 5 years for vehicle finance and $50,000 over 5 years for equipment finance, as required under the National Credit Code.
How is an investment property loan assessed differently?
Three ways. Rental income is shaded: most lenders count 70% to 80% of the expected rent, and some also deduct assumed expenses, so a property renting for $600 a week adds far less to your borrowing capacity than $31,200 a year suggests. Existing debt is assessed at a buffered rate, usually 3% above the actual rate, on every loan you hold, so the second and third property get harder to service than the first. And investor loans are priced higher than owner-occupier loans, with a further premium for interest-only, and interest-only terms are generally capped at five years before the loan reverts to principal and interest.
Each of those levers is set by lender policy, not by law, and they differ enough between lenders that the same investor can be declined at one bank and approved at the next.
What does a mortgage broker do for a property investor?
They match the policy to the borrower. A broker who writes investor loans knows which lenders shade rent least, which assess your existing loans at actual rather than buffered repayments, which allow the longest interest-only term, and which will lend against apartments, regional property or a fourth security. They also structure the loan so it works at tax time: the investment loan kept separate from your home loan, an offset account attached to the non-deductible debt first, and any equity release documented as a separate split so the purpose of every dollar is clear to your accountant.
For a portfolio investor the broker's other job is sequencing: which lender to use first so that later purchases still fit another lender's serviceability, rather than exhausting the most flexible lender on the first loan.
Should the loan be interest-only or principal and interest?
Interest-only maximises the deductible interest and keeps cash free for paying down non-deductible home loan debt, which is why most investors with a home loan choose it. The costs are a higher rate, a five-year cap at most lenders, and a repayment jump when it reverts. Principal and interest builds equity in the investment and is cheaper, and suits investors who have no home loan to prioritise. A broker will model both against your tax position and your accountant's advice; the answer is rarely the same for two investors.
How should investment debt be structured for tax?
Separately, always. Interest on money borrowed to buy an income-producing property is deductible; interest on your own home is not. If both sit in one loan, or an investment deposit is drawn from a home loan redraw, the purpose of each dollar has to be apportioned and the deduction can be lost. The standard structure is an investment loan secured by the investment property, a separate split or facility for any deposit released from home equity, and an offset account against the home loan. The broker sets this up; your accountant confirms it.
What do you need to bring to a broker for an investment loan?
Your income evidence as for any loan, plus the statements for every existing loan and credit card, the rental statements or a rental appraisal for the property, your current home's approximate value and loan balance if you plan to use equity, and your intended holding period and end goal. Investors who plan to buy more than one property should say so; it changes which lender the broker uses first.
How do you choose a broker for investment lending?
Ask how many investor loans they wrote in the last year, whether they have clients with three or more properties, and how they decide between lenders on rental shading and interest-only policy. A broker who talks only about rate is not the one for a portfolio. Membership of the MFAA or FBAA and a credit licence or representative number are the baseline; check them on ASIC's register.
Keep reading
The guides a broker will walk you through.
Frequently asked questions
Do I need a mortgage broker for an investment property?
How much rental income do lenders count?
Can I use equity in my home as the deposit for an investment property?
Why is interest-only capped at five years?
Does an investment loan affect my ability to get a home loan later?
Planning your first, or your next, investment property?
Answer a few quick questions and a licensed broker partner who writes investor loans will match your income and existing debt to the lenders whose policy fits. Free, no obligation.