The easiest way to research investment loans

Research before application determines whether an investment loan supports your wealth-building strategy or creates structural problems that persist across the life of the asset.

The legislative changes enacted in June 2026 require you to understand not only product features and interest costs but also how the tax treatment of a particular property interacts with your broader income position. The regulatory environment has moved beyond interest rate comparison. You need to assess serviceability treatment under the debt-to-income framework, the quarantining of losses for properties acquired after 12 May 2026, and whether a lender will accommodate expanding your property portfolio without forcing refinance of existing debt.

What the debt-to-income cap means for your borrowing capacity

APRA's DTI restriction limits lenders to funding 20 per cent of new investor loans at a DTI of six times or greater. If your gross income is $180,000 and you already carry $600,000 in owner-occupied debt, additional investor borrowing that pushes total debt above $1,080,000 falls into the restricted allocation. Not every lender will lend to you at that level, and those that do may require a larger deposit or apply pricing adjustments.

The cap is applied separately to investor and owner-occupier portfolios at each ADI. Consider a solicitor with $500,000 in existing owner-occupied debt and gross income of $200,000. That solicitor applies for a $700,000 investor loan. Total debt is $1,200,000, DTI is six. The investor loan sits exactly at the threshold and competes for space within the lender's 20 per cent allocation. A second lender with no prior relationship may treat the application as DTI above six if they assess living expenses more conservatively. Understanding how each lender calculates the ratio and whether they have allocation remaining is part of the research process, not something you discover at conditional approval.

How negative gearing quarantine affects your choice of property

From 1 July 2027, net rental losses on residential dwellings acquired on or after 7:30pm AEST on 12 May 2026 cannot be offset against salary, wages or other non-residential income. Losses are quarantined and carried forward to offset future rental income or future capital gains on residential property. Properties acquired before that time, and eligible new builds acquired after that time, remain outside the quarantine.

This changes the return profile of established dwellings purchased now. If you acquire an established dwelling that generates a $15,000 annual loss, that loss previously reduced your taxable income by $15,000. Under the new rules, it accumulates and can only be used when the property becomes cash-flow positive or when you sell and realise a capital gain. The immediate tax benefit is removed. The after-tax cost of holding the property increases, and serviceability suffers because you cannot demonstrate the offset when lenders assess your net position.

Eligible new builds retain access to negative gearing. A dwelling constructed on previously vacant land, or a development that increases the number of dwellings on a site, qualifies. A knock-down rebuild that replaces one dwelling with one dwelling does not qualify. A new build occupied for more than 12 months before sale to a subsequent investor loses the exemption for that subsequent purchaser. If you are weighing an established unit against a newly completed townhouse, the taxation difference may outweigh the difference in purchase price or location. That calculation is central to your research.

Interest rate structure and repayment type

Most investor loans are written on variable rates with interest-only repayments for an initial period. The interest-only term allows you to minimise cash outlays, maximise deductions and redirect surplus cash to offset accounts linked to non-deductible debt. Once the interest-only period ends, the loan reverts to principal and interest and the repayment increases.

Fixed rates lock in your cost but remove flexibility. If you want to increase repayments, access a redraw facility or refinance your investment loan before the fixed term ends, you may face break costs. The choice between variable and fixed turns on your view of rate movements and your need for product features during the loan term. A split structure, part fixed and part variable, gives you certainty on a portion of the debt and flexibility on the remainder.

Interest-only repayments are not available indefinitely. Lenders typically offer five years interest-only on investor loans, sometimes longer depending on loan-to-value ratio and deposit size. After that period, you revert to principal and interest unless you apply for an extension. Not all lenders will extend, and some will require a revaluation or updated financials. Your research should include the lender's policy on extensions and the likelihood that you will need to refinance to maintain interest-only terms.

Loan-to-value ratio, deposit requirements and LMI treatment

Lenders typically lend up to 80 per cent of the property value for investment purposes without requiring Lenders Mortgage Insurance. Above 80 per cent LVR, LMI is charged and the cost is capitalised into the loan or paid upfront. The premium increases steeply above 85 per cent LVR and becomes prohibitive above 90 per cent for most investors.

If you hold existing equity in another property, you may be able to use that equity as part or all of your deposit. The lender takes security over both properties and your effective LVR is calculated across the combined security pool. This approach allows you to acquire the investment property without liquidating assets, but it increases your exposure if either property falls in value. Some lenders cap the total LVR when cross-securitising, others do not. Some will allow you to hold securities separately so that one property can be sold or refinanced without discharging the entire loan. That distinction matters if you plan to expand your portfolio or sell selectively over time.

Solicitors and barristers may have access to LMI waivers or discounted LMI on investment loans with certain lenders. These concessions are not universal and depend on the lender's appetite for professional lending at the time of application. Research which lenders extend those concessions to investor lending and whether the waiver applies at 85 per cent, 90 per cent or another threshold. The difference in upfront cost can exceed $20,000 on a high-LVR loan.

Product features that matter for investors

Offset accounts linked to investment loans reduce the interest charged without reducing the deductible interest amount, provided the offset is structured correctly. Not all investment loan products offer offset accounts, and some lenders charge higher rates for products that include offsets. If you plan to park surplus cash, rental income or bonus payments in the offset to reduce interest, confirm the product includes that feature and understand the rate differential.

Redraw facilities allow you to access additional repayments you have made above the minimum. Redraw is less flexible than an offset because the funds are held within the loan and may not be instantly accessible. Some lenders restrict redraw to minimum amounts or charge processing fees. If you make principal repayments during the interest-only period or after reverting to principal and interest, redraw gives you access to those funds without refinancing. If your strategy involves cycling cash between properties or using surplus repayments to fund renovations, confirm the redraw terms before committing.

Portability allows you to transfer the loan to a different security without discharging and rewriting the facility. If you sell the investment property and acquire another, portability means you retain the existing loan terms, rate and features without paying discharge fees or application fees. Not all lenders offer portability on investor loans, and those that do may impose conditions such as settlement timing or property type.

Rental income treatment and serviceability calculation

Lenders apply a rental income shading when assessing serviceability. Rental income is discounted by 20 per cent or more to account for vacancy, maintenance and management costs. If a property generates $35,000 in annual rent, the lender may assess your income at $28,000 or less. The higher the shading, the lower your borrowing capacity.

Vacancy rates vary by location and property type. A unit in an oversupplied precinct may have higher vacancy risk than a detached house in an area with low rental stock. Lenders do not adjust shading based on suburb-level data, but your research should include current vacancy rates, median rent, demand drivers and tenant demographics. That research informs whether the rental income assumption used in serviceability is realistic and whether the property will perform as modelled.

Some lenders treat rental income more favourably if you can demonstrate a signed lease or a rental appraisal from a licensed agent. Others apply a flat shading regardless of documentation. Knowing which lenders take a more refined approach can increase your borrowing capacity by tens of thousands of dollars without changing your deposit or income position.

How lenders assess expenses on investment property

Body corporate fees, council rates, strata levies, landlord insurance and property management fees are ongoing costs that reduce your net rental income. Lenders add these expenses to your liabilities when assessing serviceability. A unit with $6,000 in annual body corporate fees and $2,500 in council rates reduces your assessed net position by $8,500 before you account for vacancy or maintenance.

These costs vary by property type and location. A townhouse in a complex with a pool, lift and on-site management may carry body corporate fees of $8,000 or more. A detached house on a separate title has no body corporate but may have higher maintenance costs. Your research should include the current body corporate budget, the sinking fund balance, any planned capital works and the historical pattern of levy increases. A property with deferred maintenance or an underfunded sinking fund will likely see levy increases that erode cash flow and reduce the margin available for rate rises or vacancies.

Claimable expenses such as depreciation, loan interest and property management fees reduce taxable income but do not improve cash flow. Lenders do not give you credit for depreciation when assessing serviceability because it is a non-cash deduction. Your research should separate cash expenses from tax deductions and model the property on an after-tax cash flow basis, not an accounting profit basis.

Capital gains tax treatment under the new indexation rules

From 1 July 2027, the 50 per cent CGT discount for individuals is replaced with cost base indexation and a 30 per cent minimum tax rate on real gains for most investment properties. Gains accrued before 1 July 2027 continue under current rules, so only gains accruing after that date are affected. Eligible new builds allow you to elect between the discount and the indexed method.

Indexation adjusts your cost base by the movement in the Consumer Price Index between acquisition and disposal. If you acquire a property for $800,000 and CPI increases by 15 per cent over the holding period, your indexed cost base is $920,000. If you sell for $1,100,000, the real gain is $180,000 and the minimum tax rate is 30 per cent, resulting in tax of $54,000. Under the previous discount method, the nominal gain of $300,000 would be halved to $150,000 and taxed at your marginal rate. If your marginal rate is 45 per cent plus Medicare levy, the tax would be $75,750. The indexed method delivers a lower tax in that scenario.

The outcome depends on the rate of capital growth, the rate of inflation and your marginal tax rate at the time of sale. Properties with low capital growth relative to inflation benefit from indexation. Properties with high nominal growth relative to inflation may face higher tax under the indexed method, particularly if your marginal rate is below 47 per cent. This is a material research question if you are comparing an established dwelling subject to the new rules with an eligible new build where you can elect the treatment that delivers the lower tax.

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