Buying an investment property runs on different lending rules to buying a home to live in. Understanding those differences upfront — before you're mid-negotiation on a property — makes the difference between a smooth settlement and a scramble.
Interest-only vs. principal & interest
Many investors choose interest-only repayments for a set period (commonly 1–5 years), keeping repayments lower and preserving cash flow — often pairing this with an offset account. It's worth knowing that lenders assess your serviceability on the higher P&I repayment that applies once the interest-only period ends, not the lower interest-only figure, even if you plan to stay interest-only long-term.
How lenders assess rental income
Most lenders count a portion of expected or actual rental income toward your serviceability — commonly around 70–80% of the gross rent, with the shading accounting for vacancy periods, management fees and maintenance. This "haircut" varies by lender, which is one of several reasons your borrowing capacity for an investment purchase can differ meaningfully between lenders.
LVR and pricing differences
Investment loans often come with a slightly higher interest rate than owner-occupier loans, and some lenders cap the maximum LVR lower for investment purchases. This isn't arbitrary — regulatory guidance has periodically directed lenders to hold investment lending to tighter standards, and pricing reflects that.
Avoid cross-collateralising your home and investment property with the same lender unless there's a specific reason to. It can make refinancing or selling one property later far more complicated than it needs to be — standalone security per property is usually the cleaner structure.
Building toward a second (or third) property
Each additional investment property changes your overall serviceability picture — existing loan repayments count against you in future applications, even on properties that are cash-flow positive. Lenders vary in how conservatively they treat this, which is where comparing across a panel genuinely changes what's possible for your next purchase.
A note on tax
Negative gearing, depreciation and capital gains treatment are real considerations in an investment purchase, but they're accounting and tax questions, not lending ones — we're not accountants, and this isn't tax advice. Worth having that conversation with an accountant alongside the lending conversation, not instead of it.
Next step
If you're planning an investment purchase, a good starting point is understanding your borrowing capacity with rental income factored in properly — our borrowing power calculator gives you a starting estimate, and we can model your actual scenario in more detail from there.
Talk to us about an investment purchase