Investment Property Loan Guide 2026

Financing Your Investment Property

Property investment remains one of Australia's most popular wealth-building strategies. Understanding your financing options is crucial to maximizing returns.

Investment Loan vs Home Loan

Investment loans typically have:

• Higher interest rates: Usually 0.2-0.5% higher than owner-occupied rates
• Higher deposit requirements: Most lenders want 10-20%
• Different tax treatment: Interest is tax-deductible against rental income
• More scrutiny: Lenders assess rental income conservatively

Understanding Negative Gearing

Negative gearing occurs when your property expenses exceed rental income. The loss can be offset against your other income, reducing your tax bill.

Example: If your investment property loses $10,000/year and you're in the 37% tax bracket, you'll save $3,700 in tax.

Using Equity to Buy Investment Property

If you own a home, you may be able to use its equity as a deposit for an investment property:

1. Calculate usable equity: (Property value × 80%) - current loan balance
2. Set up an equity release: Often as a line of credit or loan increase
3. Use funds for investment deposit: Keep investment borrowings separate for tax purposes

Interest-Only vs Principal & Interest

Interest-Only loans:

• Lower repayments during interest-only period (usually 5 years)
• Maximize tax deductions (interest is deductible, principal is not)
• Higher total cost over loan life

Principal & Interest loans:

• Build equity faster
• Lower interest rates usually available
• Higher initial repayments

Building a Property Portfolio

Key strategies for multiple investment properties:

• Diversify locations: Don't put all investments in one suburb
• Maintain buffer funds: Keep 6+ months of expenses in reserve
• Review regularly: Check rates and loan structures annually
• Consider cross-collateralization carefully: It can limit future flexibility