Investment Property Loans: How to Finance Your Next Property
Looking to grow your property portfolio? Whether you're an experienced investor or just starting out, understanding how investment property loans work can make all the difference. In this guide, we'll explain your finance options, how to use equity effectively, and how to structure your loan for long-term success.
Getting started
Investment property loans are powerful wealth-building tools that can help you leverage rental income and capital growth. With the right strategy and loan structure, you can build a portfolio that generates passive income and long-term financial security.
Investment Property Benefits
Equity Access
Use your current property equity as a deposit and leverage existing wealth for new investments.
Rental Income
Lenders include 70-80% of projected rental income in borrowing capacity assessments.
Tax Advantages
Claim deductions on interest, expenses, and depreciation to maximise investment returns.
Flexible Structure
Choose from interest-only, offset accounts, and loan splits to optimise cash flow and growth.
What Is an Investment Property Loan?
An investment property loan is a type of home loan used to purchase real estate that you intend to rent out rather than live in. It's a common strategy for building wealth through rental income and capital growth.
Key features of investment loans:
- Loan assessments include projected rental income
- Often come with slightly higher interest rates than owner-occupied loans
- Offer options like interest-only repayments
- Can provide tax benefits for investors
How Do Investment Loans Differ from Regular Home Loans?
While they may look similar on the surface, investment loans are structured and assessed differently to standard home loans.
Key differences include:
Interest rates: Investment loans tend to carry higher rates due to increased lending risk.
Loan serviceability: Lenders consider both your personal income and expected rental income.
Tax treatment: You may be able to claim deductions on interest and property expenses.
Even with slightly higher interest rates, the ability to earn rental income and claim deductions can make investment loans a powerful wealth-building tool.
Interest-Only vs Principal-and-Interest: Pros and Cons
One of the first choices you'll need to make is how you want to repay your loan: interest-only or principal-and-interest.
Interest-Only Loans
With an interest-only loan, you only repay the interest for a set period (typically 1–5 years), which lowers your monthly repayments.
Advantages:
- Lower monthly repayments = improved short-term cash flow
- Interest may be tax-deductible
- Can free up funds for other investments
Disadvantages:
- You're not reducing your loan balance during the interest-only period
- Repayments will increase when the interest-only period ends
- You may pay more interest overall
Principal-and-Interest (P&I) Loans
With P&I loans, you start paying off the loan balance as well as interest from day one.
Advantages:
- Builds equity from the start
- Pays off the loan faster
- Less interest paid over time
Disadvantages:
- Higher repayments can reduce cash flow
- May limit your ability to invest elsewhere
Example: On a $600,000 loan at 6.5%, interest-only repayments are around $3,250/month. With P&I, repayments rise to roughly $3,800/month. That extra $550 could go toward savings or a second investment—depending on your strategy.
Using Equity from Your Current Home as a Deposit
Already own property? You may be able to tap into your existing home's equity instead of saving for a deposit.
What is equity?
Equity is the difference between your home's market value and your current loan balance. If your home is valued at $800,000 and you owe $500,000, you may have $300,000 in equity.
Ways to access equity:
- Loan top-up: Increase your current loan and release funds
- Redraw facility: Withdraw extra repayments you've made on your home loan
- Line of credit: A flexible loan secured against your equity, used like a credit card
Warning: Accessing equity increases your debt. Make sure your new repayments are manageable and align with your investment goals.
Investment Loan Eligibility: What Do Lenders Look For?
Getting an investment loan approved comes down to your overall financial health, not just the property itself.
Lenders typically assess:
- Your personal income (plus expected rental income)
- Existing debts and monthly expenses
- Credit score and history
- Employment status and stability
- Available deposit or equity
Loan-to-Value Ratio (LVR)
Your LVR is the percentage of the property's value you're borrowing. A lower LVR (80% or less) generally gives you better rates and avoids Lenders Mortgage Insurance (LMI).
How to Maximise Borrowing Power as an Investor
Want to borrow more? Here are some practical steps to improve your loan application:
- Declare all forms of income, including rent and bonuses
- Pay off or reduce high-interest debts like credit cards
- Lower your credit card limits—even if you're not using them
- Keep consistent savings habits to show financial discipline
- Choose the right loan structure to minimise repayments and boost serviceability
Some lenders will only include 70–80% of your rental income in their calculations, so factor that into your planning.
Tax Implications of Investment Loans (High-Level Overview)
One of the major advantages of property investment is the potential to claim tax deductions.
Common deductions may include:
- Interest on your investment loan
- Property management fees and maintenance costs
- Insurance, council rates, and strata fees
- Depreciation on fixtures, fittings and the building itself
Negative gearing
If your investment expenses exceed your rental income, the shortfall may be deducted from your taxable income. This can reduce your overall tax bill—though it's important to understand the risks if property values decline or interest rates rise.
Warning: Tax outcomes can vary significantly based on your income, property type, and structure. Always consult a registered tax agent for personalised advice.
Why Loan Structure Matters: Offset, Redraw, and Splits
Choosing the right loan features can give you flexibility and help you grow your portfolio more efficiently.
Offset Account
An offset account is a transaction account linked to your loan. The balance offsets the loan principal, reducing the interest you pay.
Example: If you owe $400,000 and have $50,000 in your offset, you're only charged interest on $350,000.
Redraw Facility
Lets you access any extra repayments you've made. Useful for emergencies or future investment—but keep in mind, redraws can affect your interest deductions.
Loan Splits
Splitting your loan means you can mix fixed and variable rates or separate home and investment borrowings. This is especially helpful for managing risk and budgeting.
An experienced broker can help you structure your loans with future investments in mind, not just your current purchase.
How Stryve Supports Property Investors
At Stryve, we understand that smart property investment is about more than just getting approved—it's about setting up a strategy for long-term growth.
Here's how we help investors:
- Customised loan structures based on your financial goals
- Access to lenders who offer flexible investment terms
- Support with using equity across multiple properties
- Strategic guidance on repayments, offsets, and portfolio expansion
Whether you're planning your first investment or scaling your portfolio, we're here to help you make confident, informed decisions.
Frequently Asked Questions
What's the minimum deposit for an investment loan?
Most lenders require at least a 10–20% deposit. A 20% deposit helps avoid LMI, which can save thousands.
Can I use equity instead of a cash deposit?
Yes—if you have enough equity and can comfortably afford the increased repayments, lenders will often allow you to use equity as your full deposit.
Should I choose an interest-only loan?
Interest-only loans can be useful for managing cash flow in the short term, but they don't reduce your loan balance. They're best suited to investors with a clear exit or growth strategy.
Is rental income counted towards my loan application?
Yes—lenders typically include 70–80% of expected rental income when assessing your borrowing capacity.
Do I need a broker to get an investment loan?
Not necessarily—but an experienced broker like Stryve can save you time, compare dozens of lenders, and help you structure your loan for long-term success.
Ready to take the next step?
Talk to a Stryve broker today and find out how we can help you finance your next investment property with confidence.