Investment Loan Options
Investment property loans have different features and pricing compared to owner-occupier loans. Understanding your options is key to maximising your returns:
- Principal and interest — Pay down the loan over time, building equity faster
- Interest-only — Lower repayments during the interest-only period, preserving cash flow for other investments
- Fixed rate — Lock in repayment certainty, useful for cash-flow planning
- Variable rate — Flexibility to make extra repayments and take advantage of rate drops
- Line of credit — Access equity in existing properties to fund deposits on new purchases
Key Concepts for Property Investors
Negative gearing — When your rental income is less than your loan repayments and expenses, the shortfall can generally be claimed as a tax deduction. This makes interest-only loans popular among investors who want to maximise deductions while the property grows in value.
Loan-to-Value Ratio (LVR) — Most lenders will fund up to 80% of an investment property's value without LMI. Some will go higher, but the rates and fees increase. If you have equity in your existing home, you may be able to use it as security to avoid a cash deposit altogether.
Rental income assessment — Lenders typically use 70–80% of rental income for serviceability calculations, accounting for vacancies and management costs. Understanding how each lender assesses rental income can significantly impact how much you can borrow.
Structuring Your Investment Loan
Getting the structure right from the start is crucial. Mixing personal and investment debt, or not separating loan accounts properly, can create problems with tax deductions down the line. BAMA Loans ensures your investment finance is structured correctly — keeping investment and personal borrowing separate and choosing repayment types that align with your strategy.
Why Work With an Investment Loan Broker?
Different lenders assess investment loans differently. Some are more generous with rental income calculations, some offer better rates for investors, and some have policies that work better for multi-property portfolios. A broker who understands investment lending can identify the right lender for your specific situation — and it costs you nothing.