The right investment loan is the one built around your goal, not the one with the lowest advertised rate. A buyer chasing long-term growth needs a different structure from one who wants income soon, and the loan should reflect that from day one.
For investors in Eagleby and the wider Logan area, the first step is to name the goal and the timeframe. The loan structure follows from there.
What Should an Investment Loan Be Built Around?
An investment loan should be built around one clear goal, such as growing a portfolio, building wealth over time or creating passive income. Each goal points to different choices on repayment type, loan to value ratio (LVR) and how much you borrow.
If your aim is portfolio growth, you may want to keep cash flow healthy so you can qualify for the next purchase. If your aim is long-term financial freedom, you may focus on paying down debt over time. Our investment loans page outlines the range of products we can compare for you.
Interest Only or Principal and Interest: Which Suits Your Goal?
Interest only repayments cover the interest charged and leave the balance unchanged. Principal and interest repayments cover the interest and reduce the balance. Interest only usually means lower repayments in the early years, but you owe the same amount at the end of that period.
There is also a borrowing capacity point. Lenders assess an interest only loan on the repayments that would apply once principal and interest begins, over the shorter remaining term. A 30-year loan with a 5-year interest only period is assessed over the remaining 25 years. An interest only feature therefore does not increase how much you can borrow.
The trade-off is that once the interest only period ends, repayments rise because the same balance is repaid over a shorter time. Lenders also set their own rules on how long an interest only period can run.
As an example, consider an investor with a $500,000 loan at an illustrative rate of 6.75% p.a. Interest only repayments would be about $2,813 a month. Over 30 years on principal and interest, repayments would be about $3,243 a month. If that investor took five years interest only and then moved to principal and interest, the repayment over the remaining 25 years would be about $3,455 a month. The lower early repayment gave breathing room, but the later repayment is higher than if principal had been paid from the start.
The outcome depends on the goal. If the investor used the extra cash flow to cover costs and build a buffer, the structure did its job. If the money was not set aside, the higher repayment later could be a strain. You can test your own numbers with our mortgage repayment calculator.
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How Much Can You Borrow for an Investment Property?
Your investment loan amount depends on your income, existing debts, living expenses and the rent the property is expected to earn. Each lender sets its own policy, so the amount can differ between lenders.
Banks must test your ability to repay at a rate at least 3.0 percentage points above the loan rate. Lenders also usually count only part of the expected rent. APRA's guidance is that a prudent lender applies a haircut of at least 20 per cent, so no more than 80 per cent of expected rent is counted. Existing debts such as credit cards are generally assessed using the card limit, not the balance. Reducing unused limits before you apply can therefore lift your result. Our borrowing capacity page explains this further.
Deposit, LVR and Lenders Mortgage Insurance
Borrowing more than 80 per cent of a property's value usually means paying lenders mortgage insurance (LMI). Staying at or below 80 per cent LVR generally avoids it, although the 80 per cent mark is a lender and insurer practice, not a legal limit.
The trade-off is a larger investor deposit if you want to avoid LMI. Paying LMI lets you buy sooner with a smaller deposit, but the premium is a cost you pay and it rises with the loan size and LVR. Your lender and the insurer must both approve lending above 80 per cent.
If you already own a home, you may be able to use equity as part of your deposit. Borrowing against equity increases your total debt, and interest is only tax deductible where the borrowed funds are used to earn income. For example, using equity for a holiday would not create a deductible loan. Speak with your accountant about how this applies to you.
Variable or Fixed Rate for an Investment Loan
A variable rate can move up or down with the market, while a fixed rate locks in your repayment for a set period. A loan can also be split between variable and fixed portions.
Variable loans tend to offer more flexibility, but your repayments can rise. Fixed loans give certainty, but features such as extra repayments or offset accounts can be limited, and leaving early may involve costs. Features differ between lenders, so check them before you commit. If you already hold a loan, our refinancing service can compare whether a different structure or lender suits your goal.
Negative Gearing Rules Have Changed for Investors
Negative gearing rules now depend on when you buy and what you buy. This is general information only, and you should speak with your accountant before making a decision.
Under legislation that received royal assent on 26 June 2026, losses from residential investment properties held at 7:30pm AEST on 12 May 2026 continue to be deductible against other income. Losses from eligible new builds acquired after that time can also be deducted against all income. From the 2027-28 income year, net rental losses on established residential properties bought after that time can only be used against other residential property income, with excess losses carried forward.
Changes to capital gains tax also apply from 1 July 2027. The 50 per cent discount is replaced by cost base indexation and a 30 per cent minimum tax rate on gains accruing from that date. These rules affect how long you might hold a property and whether a new build or established home suits you.
Interest is deductible only to the extent the property is rented or held to produce income, and only the interest part of a principal and interest repayment counts. Rental income needs to cover costs where possible, because a loss may not be usable the way it once was.
Checking the Property Before You Apply
Check the rental demand, running costs and any body corporate fees before you apply for finance. A property that looks affordable can become a stretch once ongoing costs are added.
Vacancy rate, expected rent and strata levies all affect your cash flow. Ask a local property manager for a rental appraisal, but note that lenders usually place less weight on appraisals than on actual rent received. Eagleby sits in the Logan City Council area, and our Eagleby mortgage broker page has local contact details.
Wagstaff Finance can compare investment loan options from banks and lenders across Australia to match your goal, deposit and timeframe. Call one of our team or book an appointment at a time that works for you.
Frequently Asked Questions
Does an interest only loan let me borrow more?
No. Lenders assess interest only loans using principal and interest repayments over the remaining term after the interest only period. This means the feature does not increase your borrowing capacity.
When do I need lenders mortgage insurance on an investment loan?
LMI is generally required when you borrow more than 80 per cent of the property's value. The premium depends on the loan size and LVR, and both the lender and insurer must approve the loan.
How much rent do lenders count when assessing an investment loan?
APRA's guidance is that prudent lenders count no more than 80 per cent of expected rent. Each lender sets its own policy, so the treatment can differ.
Has negative gearing changed for property investors?
Yes, for established residential properties bought after 7:30pm AEST on 12 May 2026, with losses restricted from the 2027-28 income year. Speak with your accountant about how this affects you.
