Investment loans are assessed differently to owner-occupier home loans — lenders look closely at rental income, your existing portfolio and how the numbers stack up under stress. Here's what to think through before you apply.
1. Understand loan-to-value ratio (LVR)
Most lenders prefer an LVR of 80% or less for investment loans, which usually means a 20% deposit. Borrowing above that threshold often triggers lenders mortgage insurance — a cost worth factoring into your numbers early. Our property buying cost calculator gives you an indicative LMI estimate.
2. Decide between interest-only and principal & interest
Many investors choose interest-only repayments to maximise cash flow and potential tax deductions, while others prefer to pay down the loan faster. There's no single right answer — it depends on your strategy. Compare the two using our interest-only calculator.
3. Factor in rental income — carefully
Lenders typically only count a portion of expected rental income (commonly around 70-80%) toward your serviceability, to allow for vacancies and costs. Don't assume 100% of the advertised rent will boost your borrowing power.
4. Consider loan structure across a portfolio
If you already own property, how your existing loans are structured can materially affect how much you can borrow for the next one. Cross-collateralisation, offset accounts and loan splits are all worth discussing with a broker before you buy again.
5. Get a realistic borrowing power estimate first
Start with our borrowing power calculator for a ballpark figure, then talk to us about how existing debts and rental income change the picture.