Financing an investment property involves many of the same fundamentals as a standard home loan, but with some important differences in how lenders assess the application and structure the loan. Here's an overview of what tends to be different.
How lenders assess investment loans
Lenders typically consider potential rental income when assessing your borrowing capacity for an investment property, though usually only a portion of expected rent is counted towards serviceability, as a buffer against vacancy periods or rent fluctuations. Your existing income, expenses, and other debts still play a central role.
Loan structure considerations
Investment loans can be structured as interest-only or principal-and-interest, each with different implications for cash flow and long-term cost. Many investors also consider features like offset accounts or interest-only periods as part of a broader investment strategy — though the right structure depends entirely on individual goals and circumstances.
Using equity to expand a portfolio
Some investors use equity built up in an existing property to help fund a deposit on another. This can be an effective strategy, but it also means both properties are tied to your overall financial position, so it's worth understanding the risks as well as the opportunities.
Tax and cash flow considerations
Investment property ownership has tax implications — including potential deductions and obligations — that are outside the scope of mortgage broking advice. It's worth speaking with a qualified accountant or tax adviser alongside your broker when planning an investment purchase.
Getting the loan structure right from the start
Because investment lending criteria and loan structures vary between lenders, comparing your options with a broker who understands investment lending can help you choose a structure that suits your specific strategy, rather than defaulting to a standard owner-occupier approach.
This article is general information only and does not constitute financial, tax, or investment advice.
VIP Finance operates as a Credit Representative (Number 565614) and holds ABN 59 323 956 021.
The information on this page is general in nature and doesn’t take into account your personal financial situation or objectives. It isn’t personal financial advice, and you should consider whether it’s appropriate for your circumstances before acting on it. Loan approval is always subject to the lender’s own credit assessment criteria.
