Your investment loan should be chosen to suit your goal, not the other way around. Before you compare lenders, it helps to decide whether you want rental income, long-term growth, or a mix of both.
If you are new to property investing, that is a perfectly normal place to start. This guide walks you through the choices one step at a time, so you can talk to a broker with confidence.
What Is an Investment Loan and How Does It Work?
An investment loan is a home loan used to buy a property that you plan to rent out. It works much like a regular home loan, but lenders treat it as a separate type of lending, and the rules around rent and tax are different.
The loan is secured against the property, and the lender will assess whether you can afford the repayments from your income and the expected rent. Our investment loans page gives a broader overview if you want to see the basics first.
How Much Can You Borrow for an Investment Property?
Your investment loan amount depends on your income, your debts and your living costs. Lenders also test whether you could still manage repayments if the interest rate rose by 3.0 percentage points above the loan rate.
That 3.0 point buffer is set by APRA, the banking regulator, and applies to banks and other authorised deposit-taking institutions. Lenders also usually count only part of the expected rent. APRA's guidance is that no more than 80 per cent of expected rent should be counted, so a rental that looks strong on paper will not add its full value to your borrowing power.
If you have existing debts, such as a credit card, lenders may assess a notional repayment based on the card's limit, even if the balance is zero. The notional repayment is set by each lender's policy. Lowering unused limits before you apply can be worth discussing with a broker. You can read more on borrowing capacity to see how the pieces fit together.
Interest Only or Principal and Interest: Which Suits Your Goal?
Interest only means you pay just the interest for a set period, while principal and interest means you also pay down the loan. Interest only lowers your repayments for a time, but your loan balance does not shrink during that period.
Here is an illustrative example at 6.75% p.a. Say you borrow $500,000. Interest only repayments would be about $2,813 a month (500,000 x 6.75% / 12). On a 30-year principal and interest loan at the same rate, repayments would be about $3,243 a month. That is roughly $430 a month less on interest only.
The trade-off is that interest only does not increase how much you can borrow. Lenders assess it as if you will be paying principal and interest over the years left after the interest-only period. For a 30-year loan with a 5-year interest-only period, that means the remaining 25 years. Once the interest-only period ends, your repayments rise, and over 25 years at 6.75% they would be about $3,455 a month on the same $500,000. Our page on interest only loans explains how this works in more detail.
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Variable or Fixed Rate: How Do You Choose?
A variable rate can move up or down over time, while a fixed rate stays the same for an agreed period. Variable gives you flexibility but less certainty, and fixed gives you certainty but may limit what you can do with the loan.
Features such as extra repayments, offset accounts and redraw differ between lenders, and they can differ between the fixed and variable parts of a loan. Fixed loans may also cost you if you leave early. Ask your broker to check these details for each product before you commit. If you already hold a fixed loan, fixed rate expiry is worth reading before the end date arrives.
How Does Negative Gearing Work After the 2026 Changes?
Negative gearing is when your rent does not cover your costs, and the loss may be deductible against other income. The rules changed in 2026, so the date you buy matters. Please get advice from your accountant before you make decisions based on tax.
Losses on residential properties held at 7:30pm AEST on 12 May 2026 stay deductible against other income until the property is sold. Eligible new builds acquired after that date can also keep this treatment. From the 2027-28 income year, net rental losses on established residential properties bought after that time can only be used against other residential property income, including residential capital gains. Unused losses can be carried forward.
Interest on money borrowed to buy a rental is generally deductible, but only the interest part of a principal and interest repayment. The principal part is not. If you later redraw money for personal use, that portion of the loan may stop being deductible, so keep borrowing for investing and for personal spending separate.
Capital gains tax also changes. The 50 per cent discount continues for gains up to 1 July 2027, and from that date a different system using cost base indexation and a 30 per cent minimum tax applies. Your accountant can explain how this affects your plans.
Using Equity to Grow Your Portfolio
Equity is the difference between what your property is worth and what you owe, and you may be able to borrow against it for your next purchase. Lenders decide how much equity you can access, and borrowing above 80 per cent of the property value usually needs lenders mortgage insurance (LMI).
One possible approach for an owner who wants a deposit for an investment property is to ask a broker whether a lender would release equity, and whether it could be set up as a separate loan split used only for the deposit and costs. This is subject to the lender's approval, your serviceability and each lender's equity caps. Whether the interest is deductible depends on how the borrowed funds are actually used, so keep the split for investment purposes only and speak to your accountant.
The cost is that you are borrowing more, secured over your home as well as the new property, so a fall in value or a rise in rates affects both. Our pages on equity release loans and expanding your property portfolio cover this further.
Do You Need to Refinance an Existing Investment Loan?
Refinancing means moving your loan to a new lender or product, and it can suit you if your current loan no longer fits your goals. Fees such as discharge and valuation costs vary by lender, so they should be weighed against any benefit.
Our investment loan refinancing page explains the process. A short review of your current loan can also show whether you are paying for features you do not use.
If you are ready to talk it through, call one of our team or book an appointment at a time that works for you. We will take it slowly, explain each step in plain English, and help you choose a loan that matches your property goals.
Frequently Asked Questions
How much of the rent do lenders count for an investment loan?
APRA's guidance is that no more than 80 per cent of expected rent should be counted when assessing your loan. Each lender sets its own detailed policy, so a broker can check how rent will be treated.
Does interest only increase how much I can borrow?
No. Lenders assess interest only loans using principal and interest repayments over the remaining term after the interest-only period. This means interest only does not lift your borrowing capacity.
Can I still negatively gear an investment property?
It depends on when you buy and what you buy. Properties held at 7:30pm AEST on 12 May 2026 and eligible new builds keep current treatment, while later established purchases face new limits from the 2027-28 income year. Speak to your accountant.
Is the interest on my investment loan tax deductible?
Interest on money borrowed to buy or hold 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, so check your situation with your accountant.
