Property Investment Loans
The loan on an investment property does more work than most investors realise. It determines how much you can buy, how much of the cost is deductible, how exposed you are if rates move or the property sits empty, and how easily you can buy the next one. Getting the structure right at the first purchase makes the second one considerably easier.
What property investment loans involves
How a mortgage broker helps with investment lending
Borrowing capacity across multiple properties
Every lender treats existing investment debt and rental income differently. Some are far more workable for investors with several properties than others. The order in which you use lenders affects how many properties you can eventually hold.
Loan structure and deductibility
Which debt is investment debt and which is personal debt matters, because the tax treatment differs. Mixing them, or paying down the wrong one first, can cost you. We structure loans so the distinction stays clean. The tax treatment itself is a question for your accountant, and we work with them rather than advising on it ourselves.
Interest only versus principal and interest
Interest only lending is common among investors and it is not automatically the right choice. It preserves cash flow and keeps the deductible balance intact, and it also means the debt is not reducing and the repayments increase when the period ends. Lenders apply extra scrutiny to interest only lending.
Using equity from your home
Many investors fund a deposit using equity in their existing property. How this is arranged matters a great deal, because a single loan covering both personal and investment purposes creates a mixed purpose debt that is difficult to untangle later.
Cross collateralisation, and why to avoid it
Where one lender holds several of your properties as security for several loans, your flexibility drops sharply. Selling one property can require the lender’s agreement on all of them, and moving a single loan elsewhere becomes difficult. It is often the default arrangement if nobody asks for anything different. We usually recommend structuring to avoid it.
Buying through a trust or company
Investors sometimes buy through a trust or a company for asset protection or tax reasons. Fewer lenders lend to these structures and their requirements differ. Whether the structure is right for you is a question for your accountant and solicitor. We handle whether and how it can be financed.
Buying the next one
The most common investor problem is not the first purchase but the third. We look at how each loan affects your future capacity, rather than optimising one purchase at a time.
Speak to our experienced team today.
Investment lending by situation
1 – You are buying your first investment property
Usually funded partly by equity in your home. How that equity is accessed determines how clean your position stays.
2 – You already own investment properties and want another
Capacity is now the constraint. Which lender you use, and in which order, becomes the central question.
3 – You are buying with a partner or a family member
Ownership shares, whose income supports the loan, and what happens if one party wants out all need to be settled before the purchase.
4 – You are considering buying through a trust or company
Fewer lenders, different requirements, and a decision that should involve your accountant first.
5 – Your interest only period is ending
Repayments increase, sometimes substantially. There are options, and they are wider before the period ends than after.
6 – You are moving out of your home and renting it out
The loan does not automatically change, but the tax treatment does, and the structure that suited an owner occupied property may not suit an investment.
7 – You are self employed and investing
Investment lending on self employed income narrows the lender options further, which makes lender selection more important.
Who this is for
- First time investors funding a deposit from home equity
- Existing investors who have hit a borrowing capacity ceiling
- Investors whose loans are cross collateralised and want to untangle them
- Anyone whose interest only period is ending
Who this isn’t for
- Anyone wanting advice on which property or which suburb to buy. We arrange finance. We do not sell property or recommend properties, and we are wary of anyone who does both.
- Anyone wanting tax advice on negative gearing or deductions. That is your accountant’s role, and we work alongside them.
Our advice process
01 Evaluation
02 Discovery
03 Strategy
04 Implementation
05 Review
Property investment loan FAQs
How much deposit do I need for an investment property?
It varies by lender and is often higher than for an owner occupied purchase. Many investors fund the deposit using equity in a property they already own rather than cash. Where the deposit falls below a lender’s threshold, lenders mortgage insurance may apply.
Can I use the equity in my home to buy an investment property?
Usually yes, if you have sufficient equity and the income to support the additional borrowing. How it is arranged matters. Keeping the investment borrowing separate from your home loan, rather than combining them into one, keeps the position clean and is generally simpler for tax purposes.
Is rental income counted towards my borrowing capacity?
Generally yes, but usually only in part. Lenders apply a discount to allow for vacancy periods and costs, and the discount differs between lenders. This is one of the main reasons borrowing capacity varies so much between lenders for investors.
Should I use an interest only loan?
It depends on your cash flow and your strategy. Interest only preserves cash flow and keeps the loan balance intact, which some investors prefer. It also means the debt is not reducing, and repayments increase when the interest only period ends. Lenders scrutinise interest only lending more closely than principal and interest.
What is cross collateralisation and should I avoid it?
It is where one lender holds more than one of your properties as security across your loans. It reduces your flexibility: selling one property may require the lender’s agreement across the others, and moving a single loan to another lender becomes difficult. Many investors end up cross collateralised without realising, because it is often the default if nobody asks otherwise.
Can I buy an investment property through a trust or company?
Yes, though fewer lenders will lend to these structures and their requirements are different. Whether the structure suits you is a question for your accountant and solicitor. Whether and how it can be financed is what we handle.
How many investment properties can I own?
There is no legal limit. The practical limit is your borrowing capacity, which is affected by your income, your existing debts, how each lender treats your rental income, and the order in which you have used lenders. Structuring earlier purchases well is what makes later ones possible.
What happens when my interest only period ends?
The loan generally converts to principal and interest over the remaining term, which means repayments increase, sometimes significantly. Options include extending the interest only period, refinancing, or restructuring, and more of them are available before the period ends than after.