Lenders approve an investment loan when your income, debts and deposit show you can afford the repayments if rates rise. If you live in Bulimba and are thinking about buying an investment property, knowing how that assessment works puts you in a much stronger position before you apply.
This article walks through what lenders look at, where an approval can work for you, and where it can work against you.
How Do Lenders Assess an Investment Loan Application?
Lenders check whether you can afford the loan now and at a higher interest rate. Banks and other APRA-regulated lenders must test new borrowers at a rate at least 3.0 percentage points above the loan's actual rate.
That means a loan at 6.75% p.a. (our illustrative rate only, not a current offer) would be tested at 9.75% p.a. Your borrowing power is based on that higher figure, not the rate you will actually pay.
Lenders also look at your existing debts. Credit card limits count even if you pay the balance off each month, because lenders assess repayments on the limit. Reducing unused limits before you apply can lift the amount you can borrow. The trade-off is that closing a card removes that flexibility.
If you want a rough idea of where you stand, our borrowing capacity page is a good starting point.
Does Rental Income Count Towards Your Approval?
Yes, most lenders count part of the expected rent as income, but not all of it. APRA's guidance is that lenders should count no more than 80% of expected rent, which allows for periods when the property is empty.
As an example, if a property is expected to rent for $600 a week, a lender following that approach would count no more than $480 a week. Individual lenders set their own policies on what rental evidence they accept, so the figure can differ from one lender to the next.
The benefit is that a rented property can help your serviceability. The trade-off is that the rent counted is lower than what you will actually receive, so you should not assume the rent will cover the loan in the lender's calculation.
Interest Only or Principal and Interest: What Changes at Approval?
Choosing interest only does not increase how much you can borrow. Lenders assess an interest-only loan as if you will be paying principal and interest over the shorter remaining term once the interest-only period ends.
Take a 30-year loan with a 5-year interest-only period. The lender tests your ability to repay principal and interest over the remaining 25 years, which gives a lower maximum loan than a standard 30-year principal and interest loan.
Interest only keeps repayments lower during the interest-only period, which can help cash flow. The cost is that you are not paying down the loan, so the balance is the same when the period ends and repayments then rise. Interest on an investment loan is generally deductible, but only the interest part of a repayment, not the principal. Speak with your accountant about how this applies to you.
Our investment loans page covers the different structures in more detail.
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Book a chat with a Finance & Mortgage Broker at LBK Lending today.
How Much Deposit Do You Need for an Investment Property?
The 80% loan-to-value ratio (LVR) is the point above which lenders mortgage insurance (LMI) is generally required. It is not a legal limit, and each lender sets its own maximum.
Borrowing more than 80% means approval from both your lender and the LMI insurer. The premium is paid by you and depends on the loan amount and LVR. The benefit is that a smaller deposit can get you into the market sooner. The cost is the premium and a larger loan, which means higher repayments.
Some borrowers can avoid LMI in certain situations, and our no LMI loans page explains the options. Whether you qualify depends on the lender.
Using Equity in an Existing Home to Buy an Investment
If you own a home in Bulimba with built-up equity, you may be able to use it towards the deposit on an investment property. The amount available depends on your lender's valuation and its LVR policy.
Consider a buyer who owns a home and wants to purchase an investment without saving a separate cash deposit. A broker checks how much equity a lender will release, sets up a separate loan split for that amount, and keeps it apart from the home loan. The buyer is approved with the equity covering the deposit.
The outcome is a clear paper trail. The interest on the equity loan is deductible based on how the money is used, and here it is used to buy the investment. Had some of that money been spent on a car or holiday, the interest on that part would not be deductible. Your accountant can confirm how this applies to your situation.
The trade-off is that you are borrowing against your own home, so both properties are tied to your debt. If you already have a loan, a loan health check or refinancing review can show whether restructuring suits you.
Tax Changes Investors Should Know Before Applying
Negative gearing rules now depend on when you buy. Losses on residential properties held at 7:30pm AEST on 12 May 2026, and on eligible new builds, can still be deducted against other income such as your salary.
From the 2027-28 income year, net rental losses on established residential properties bought after that time can only be deducted against other residential property income. Unused losses can be carried forward. A cash-flow shortfall on an established property may therefore not reduce your tax in the way it once did.
From 1 July 2027 the capital gains tax discount is also replaced by indexation of the cost base and a 30% minimum tax rate on the gain accruing after that date. Tax outcomes vary, so get advice from your accountant before you buy.
Planning Your Next Step With a Bulimba Mortgage Broker
A broker can compare lenders for you, because their rules on rental income, LVR and interest-only terms differ. Our Bulimba mortgage broker team can look at your numbers before you commit to a property.
The downside of an approval that stretches your limit is less room if rates rise or the property sits vacant. A comfortable buffer matters as much as the approval itself.
Call one of our team or book an appointment at a time that works for you, and we will talk through your options in plain language.
Frequently Asked Questions
How do lenders assess an investment loan application?
Lenders look at your income, debts and deposit, and test whether you can afford repayments at a rate at least 3.0 percentage points above the loan rate. Banks and other APRA-regulated lenders must do this for new borrowers.
Does rental income count towards investment loan approval?
Usually part of it does. APRA's guidance is that lenders count no more than 80% of expected rent, and each lender sets its own policy on the evidence it accepts.
Does interest only help me borrow more?
No. Lenders assess interest-only loans on principal and interest repayments over the remaining term after the interest-only period, so borrowing power does not increase.
Do I need an 80% LVR to get an investment loan?
No. The 80% LVR is the point above which LMI is generally required, but lenders may approve higher LVRs. You would pay an LMI premium and need approval from the lender and the insurer.
