If you are thinking about buying an investment property in Brassall, getting the basics right before you apply can help you avoid common mistakes. This article walks through them slowly, in plain language.
None of this needs any background in finance. We will go one step at a time.
How Much Can You Borrow for an Investment Property?
Your investment loan amount depends on your income, your debts and the way a lender tests your ability to repay. Each lender sets its own rules, so the figure can differ from one to the next.
Banks, credit unions and building societies are called ADIs. APRA, the banking regulator, requires them to test new borrowers at an interest rate at least 3.0 percentage points above the loan's actual rate. That means a lender checks you could still cope if rates rose well above where they are today. Our borrowing capacity page explains how this works in more detail.
Existing debts count too. Lenders ask about your current loans and credit cards, and for cards they generally look at the limit, not just what you owe. Because lenders may assess a card on its limit, ask your lender or broker how they treat unused cards before deciding whether to close one.
Can Rental Income Help You Qualify?
Yes, lenders can count some of the expected rent as income. APRA expects them to count no more than 80 per cent of it, to allow for times when the property sits empty.
That 20 per cent allowance is not for repairs, agent fees or other costs. Those come out of your budget separately. Lenders usually place more weight on actual rent received than on an estimate. The exact evidence each lender accepts is set by that lender, so check before you sign a contract.
Interest Only or Principal and Interest: Which Suits You?
With interest only, you pay just the interest for a set period. With principal and interest, each repayment also reduces the loan. Interest only can lower your repayments for a time, but your loan balance stays the same.
It also does not increase how much you can borrow. APRA expects lenders to test interest-only borrowers as if the loan will be paid off over the shorter remaining term once the interest-only period ends.
Consider a buyer who borrows $500,000 on a 30-year loan with a 5-year interest-only period, using an illustrative rate of 6.75% p.a. During the interest-only years, the yearly interest is about $33,750, or roughly $2,813 a month. After year five, the full $500,000 is still owing, and repayments must clear it over just 25 years. At the same illustrative 6.75% p.a., that is about $3,455 a month. The buyer, who had budgeted only for the lower figure, would face a rise of around $640 a month. A better plan was to set the higher amount aside during the early years. The outcome is a smoother switch, but the trade-off is that you owe the same amount after five years as you did on day one.
Which Investment Costs Can You Claim at Tax Time?
Interest on money borrowed to buy a rental property is generally deductible while the property is rented or available for rent. Only the interest part of a principal and interest repayment counts. The part that repays the loan does not.
Costs such as council rates, insurance, property management fees and repairs can also be deductible for the period the property is rented or genuinely available for rent. How this applies to you depends on your circumstances, so speak with your accountant.
How Do the Negative Gearing Changes Affect New Buyers?
Negative gearing means your rental costs are higher than your rent. The rules changed in 2026, and the date you buy now matters.
Properties held at 7:30pm AEST on 12 May 2026 keep full deductibility of losses against other income. Eligible new builds bought after that date also keep it. From the 2027-28 income year, losses on established homes bought after that time can only be used against other residential property income, with excess losses carried forward. Properties bought between that time and 30 June 2027 can use the current rules only until 30 June 2027. Your accountant can show how this applies to your plans.
Do Offset Accounts and Equity Release Change Your Deductions?
An offset account lowers the interest charged, so it also lowers the interest you can claim. The loan balance stays the same. That is not a mistake, but it is worth knowing that a lower interest bill means a smaller deduction.
Equity release needs more care. The ATO looks at what you spend borrowed money on, not what the loan was first taken out for. Using released equity or redraw funds for personal spending can make that part of the interest non-deductible. If you are weighing this up, our equity release loans page is a good place to start, and the debt recycling page covers one way to structure borrowing.
What Does a Deposit Over or Under 20 Per Cent Mean?
Lenders Mortgage Insurance (LMI) is generally required when you borrow more than 80 per cent of the property's value. That 80 per cent point is the usual threshold, not a legal limit on how much you can borrow.
Borrowing above it needs approval from both the lender and the insurer. The premium is paid by you, and the amount depends on the loan size and LVR. The trade-off is an LMI premium, which you pay, in return for a smaller deposit. How the premium is paid, and whether it can be added to the loan, depends on the lender and insurer. State stamp duty may also apply to the premium. Our page on avoiding lenders mortgage insurance explains the options.
What Should You Do When You Hit Repayment Trouble?
If you cannot meet repayments on a regulated loan held in your own name, you can tell your lender, by phone or in writing. The lender then has set time frames to respond, and it must either agree to change the contract or explain a refusal and point you to AFCA.
Reaching out early gives you more choices. If you are already invested, a loan health check can show whether a different structure would suit you.
If you are ready to start, see our investment loans page for the basics, or read about buying your first investment property. Call one of our team or book an appointment at a time that works for you, and we will go through your numbers together in plain English.
Frequently Asked Questions
Can rental income help me get an investment loan?
Yes, lenders can count part of the expected rent as income. APRA expects no more than 80 per cent of expected rent to be counted, and each lender sets its own rules on the evidence it accepts.
Does an interest-only loan let me borrow more?
No. Lenders are expected to test interest-only loans on the shorter remaining term once the interest-only period ends, so it does not increase borrowing capacity. Repayments also rise when the period ends.
Is all my investment loan repayment tax deductible?
No. Generally only the interest part is deductible, while the part that repays the loan is not. Speak with your accountant about your situation.
When is LMI usually required on an investment loan?
LMI is generally required when you borrow more than 80 per cent of the property's value. The premium is paid by the borrower and depends on the loan size and LVR.
