The easiest way to finance a new investment property

Buying an investment property in Kingston means understanding how lenders assess income, deposits and debt. New debt-to-income caps and pending negative gearing changes add complexity, but the right loan structure and deposit strategy still make it possible to build a rental portfolio.

How much can you borrow for an investment property?

Lenders calculate your borrowing capacity by applying a serviceability buffer of 3 percentage points above the interest rate, then checking whether your net income can meet all commitments. For investment loans, that calculation includes the loan repayment plus existing debts, minus 80 per cent of expected rental income. The 20 per cent reduction accounts for vacancy, maintenance and management costs. A borrower earning $110,000 with no other debts and rental income of $600 per week may support a loan amount around $550,000 to $600,000, depending on the lender's assessment rate and policy.

Since 1 February 2026, lenders have also applied a debt-to-income cap. Up to 20 per cent of new investor loans can exceed a DTI of 6 times gross income, but most applications outside that allocation face a tighter ceiling. For an investor earning $110,000, the 6 times limit translates to $660,000 in total debt. If you carry $150,000 on an owner-occupied mortgage, your new investment loan would need to stay below $510,000 unless your lender allocates you to the above-cap portion of their book.

What deposit do you need to avoid Lenders Mortgage Insurance?

A deposit of 20 per cent of the purchase price keeps the loan-to-value ratio at 80 per cent and removes the need to pay Lenders Mortgage Insurance. On a $700,000 investment unit in Kingston, that requires $140,000 plus settlement costs. Some lenders accept an LVR of 90 per cent for investment purchases, but LMI premiums at that level can exceed $20,000, reducing cash flow in the first year.

Investors who own property with available equity can borrow against that asset instead of contributing cash. Releasing equity from your home means increasing your existing mortgage, then using those funds as the deposit for the investment property. Lenders will assess serviceability on both the increased owner-occupied loan and the new investment loan together, so your income needs to support the combined commitment.

Does the structure of your loan affect tax deductions?

Interest on borrowings used to acquire or hold an investment property is deductible when the property is rented or held to produce income. If you release equity from your home to fund the deposit, the additional interest on that increased home loan is deductible because the borrowed funds were used for investment purposes. Interest on the portion of your home loan used for private purposes remains non-deductible regardless of the security.

An interest-only loan reduces monthly repayments and maximises the deductible interest expense. Most lenders offer interest-only periods of up to five years on investment loans, after which the loan reverts to principal and interest unless you request an extension. A principal and interest structure builds equity faster but limits the immediate tax offset. The choice depends on your cash flow requirements and long-term portfolio goals.

What changes to negative gearing take effect in 2027?

From 1 July 2027, net rental losses on residential investment properties purchased on or after 7:30pm AEST on 12 May 2026 can only be offset against rental income from other residential properties or carried forward to offset future rental income or capital gains. Losses cannot be deducted from salary or wage income. Properties held before that date, including those under contract before 7:30pm on 12 May 2026, remain under existing rules.

Newly constructed dwellings built on previously vacant land, and properties where the number of dwellings increases, are exempt from the quarantine. If you settle on an off-the-plan apartment or a townhouse on a subdivided block before occupancy, you retain full access to negative gearing. A knock-down rebuild that replaces one dwelling with one dwelling does not qualify, and a new build that has been occupied for more than 12 months before you purchase it also loses the exemption.

Consider a buyer who settles on an established unit in Kingston in August 2026 with rental income of $28,000 per year and deductible expenses including interest, rates and depreciation of $36,000. The $8,000 loss can be offset against other income until 30 June 2027, but from 1 July 2027 onward, that loss is quarantined. If the buyer instead purchases a newly completed apartment in a development that meets the eligible criteria, the full deduction remains available.

How do interest rate options affect your repayments and flexibility?

Variable interest rates on property investor loans typically sit 0.20 to 0.40 percentage points above owner-occupied rates. A fixed rate locks in repayments for a chosen period, usually one to five years, but removes the ability to make extra repayments without incurring break costs. Most investors choose a variable rate or a split structure that combines a portion on a fixed rate with the remainder on a variable rate.

Features such as an offset account or redraw facility allow you to park surplus cash against the loan balance and reduce interest charges. Not all lenders offer offset accounts on fixed rate investment products, so if you expect irregular income or plan to accumulate funds for your next purchase, confirm the product supports that feature before locking in a rate.

What happens if you want to refinance an investment loan later?

Refinancing an investment property loan can unlock a lower interest rate or release additional equity once the property has increased in value. Lenders reassess borrowing capacity at the time of refinance using the current serviceability buffer and debt-to-income settings, so changes in income or other commitments can affect the outcome.

If you purchased the property before 7:30pm AEST on 12 May 2026, refinancing after that date does not change your negative gearing treatment. If you purchased after that date and the property does not meet the new build criteria, the quarantine applies to the original loan and continues when you refinance. The tax treatment is tied to the acquisition date, not the loan contract.

Should you structure your investment loan separately from your home loan?

Keeping the investment loan separate from your owner-occupied mortgage preserves the deductibility of interest and simplifies reporting. Combining multiple loans into a single facility can blur the line between deductible and non-deductible debt, particularly if you redraw funds for private use. Most brokers recommend maintaining distinct loan accounts for each purpose.

If you plan to acquire multiple properties over time, a clean structure at the outset reduces complexity when you apply for the next investment loan. Lenders will review all existing debt, and a transparent separation between investment and personal borrowing makes the assessment process more direct.

How does rental income in Kingston affect your application?

Lenders assess expected rental income using a formal valuation or a rental appraisal from a licensed property manager. In Kingston, rental yields on one- and two-bedroom units near the waterfront and public transport corridors sit around 4.5 to 5 per cent of the purchase price. A unit purchased at the suburb median with weekly rent of $600 provides annual income of $31,200, of which lenders apply 80 per cent, or $24,960, to your serviceability calculation.

If the property is tenanted at settlement, the existing lease carries weight in the application. If it is vacant, the lender relies on the appraisal. A signed lease before settlement can improve borrowing capacity if the rent is higher than the appraised amount, but lenders will verify that the lease is genuine and at market rent.

Call one of our team or book an appointment at a time that works for you to discuss your investment loan options and structure a solution tailored to your income and portfolio goals.

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