ANZ Bank in 2026: Profits Up, Strategy Shift, and What It Means for Borrowers
ANZ Bank started 2026 with a strong financial result but also significant internal changes and strategic shifts that have a...
What Is an Investment Home Loan?
An investment home loan is a mortgage used to purchase a property for income or capital growth rather than personal use. Lenders assess these loans more strictly than owner-occupied loans, typically applying higher interest rates, stricter serviceability criteria, and rental income shading (usually 70% to 80% of expected rental income).
- Key differences from a standard home loan:
- Interest rates are typically 0.2% to 0.5% p.a. higher than owner-occupier rates
- Lenders use 70% to 80% of rental income in their serviceability calculations
- Deposit requirements are generally 10% to 20%
- Interest costs may be tax-deductible as they relate to income-producing property
Use our Rental Yield Calculator:
Rental Yield Calculator
What’s an Investment Loan?
An investment loan lets you borrow money to invest in things that make income or grow in value.
Traditionally, investment loans are for property. You can also use them to invest in:
Shares
Managed funds
Different types of investments
If you use an investment loan to buy property, the loan is secured against the property.
With an investment property loan, you can:
Invest in property in your country or abroad
Buy properties over time
Use borrowed money to grow your wealth
Earn income and get tax benefits
How Does an Investment Loan Work?
An investment loan works like a home loan but with stricter rules.
Key differences include:
Higher interest rates because lenders take on risk
Lower borrowing capacity compared to home loans
Detailed assessments of your income and expenses
When you take out an investment loan:
The lender looks at your situation
The property is used as security
Your rental income might be included in your application
Lenders usually only use 70–80% of your income when calculating how much you can borrow.
Benefits of an Investment Loan
An investment loan can offer several benefits:
Leverage. You can control a more valuable asset with borrowed money
Capital growth. Your property might increase in value over time
Income. You get regular cash flow
Tax benefits. The interest on your loan and some expenses might be tax-deductible
Portfolio expansion. You can buy properties over time.
But these benefits depend on:
The loan structure
The property you choose
Market conditions
What Returns Can You Expect?
Rental yield benchmarks by location (2025):
| Location | Gross Yield |
|---|---|
| Sydney and Melbourne | typically 3% to 4% |
| Brisbane, Adelaide and Perth | typically 4% to 5% |
| Regional areas | typically 5% to 7%+ |
Example: A $600,000 property at 5% gross yield generates $30,000 per year in rent ($577 per week) before expenses.
Use our Property Cash Flow Calculator:
Property Cash Flow Calculator
Build Your Property Portfolio With More Confidence
Investment home loans can help you grow your wealth through property while creating long-term financial opportunities. FS Loan helps you understand your borrowing options, compare lenders, and choose a loan structure that better suits your investment goals.
Investment Loan Approval Process (Step-by-Step)
Understanding the process helps you avoid delays and mistakes.
Step 1: Pre-Approval
Before looking for a property:
Give your details to the lender
Get a clear idea of how much you can borrow
Make your position stronger when making offers
Step 2: Documentation
You’ll need to provide:
ID verification
Income proof
Details of your existing debts
Asset details
Step 3: Loan Application
Submit your application, including:
Financials
Property details
Step 4: Property Valuation
The lender checks:
The market value of the property
The risk level
If the property is suitable as security
Step 5: Assessment & Approval
The lender reviews:
Your income stability
Your expenses
Your debt levels
Step 6: Conditional Approval
You might need to:
Provide documents
Meet specific conditions
Step 7: Loan Offer
Review:
The interest rate
Fees
Loan terms
Step 8: Settlement
The funds are transferred, and ownership is transferred.
Investment Loan Eligibility: Who Qualifies?
Investment loans are harder to qualify for than home loans.
Basic requirements include:
5–10% deposit (is preferred)
Strong credit history
Stable employment or consistent income
Manageable existing debts
Lenders also expect:
If borrowing above 90%, you might need existing property equity
Higher scrutiny on your living expenses
Stronger financial buffers
Foreign Income, Currency & Exchange Rate Considerations
If you earn income abroad or plan to invest while living overseas, this is important.
Common Currency Acceptance
| Currency | Acceptance | Risk Level |
|---|---|---|
| USD | High | Low |
| GBP | High | Low |
| SGD | High | Low |
| AED | Medium-High | Medium |
| PKR | Limited | High |
| INR | Limited | Medium-High |
Lenders assess currency stability. Volatile currencies reduce your borrowing capacity.
Exchange Rate Impact
Even if your income is stable, exchange rates can affect your loan. For example, if your income drops 10% when converted to AUD, your borrowing capacity might reduce significantly.
2025 Foreign Buyer Restrictions
Recent regulations have increased scrutiny on foreign property buyers.
Key points:
Australian citizens are generally not affected
Non-residents might face restrictions or temporary bans
Additional approvals might be required
If you are living overseas, investing from abroad, or applying with a partner, your loan structure must be carefully planned.
Foreign Partner Considerations
If one applicant is not an Australian citizen or permanent resident:
The property might be classified as a purchase
Additional government approvals might be required
Extra costs or restrictions might apply
Tax Implications for Investment Properties
Investment property loans often come with tax considerations.
Potential benefits:
Interest on the loan might be tax-deductible
Property expenses might be claimable
However, for non-residents:
Rental income might be taxed from the first dollar
Higher tax rates might apply
Capital gains tax rules might differ
Types of Investment Loans
Residential Investment Loans
Standard investment property loans
Borrow up to 95% in some cases
Commercial Investment Loans
For offices, warehouses, retail
Higher rates and stricter terms
SMSF Investment Loans
Purchase property through a fund
Typically limited to 70% LVR
Low-Doc Investment Loans
For self-employed borrowers
Require documentation
Higher interest rates
Understanding Interest Rates
Investment loan rates vary based on:
Loan type
Deposit size
Risk profile
Investment rates are higher than owner-occupied rates. Fixed rates provide certainty while variable rates offer flexibility.
Deposit Breakdown for Investment Loans
| Deposit | Property Price | Deposit Amount | Loan Amount | LMI | Approx Repayment |
|---|---|---|---|---|---|
| 3% | $500,000 | $15,000 | $485,000 | Yes | $3,191/mo |
| 5% | $500,000 | $25,000 | $475,000 | Yes | $3,125/mo |
| 10% | $500,000 | $50,000 | $450,000 | Yes | $2,961/mo |
| 15% | $500,000 | $75,000 | $425,000 | Case-by-case | $2,796/mo |
| 20% | $500,000 | $100,000 | $400,000 | No | $2,632/mo |
Lower deposits increase loan cost, LMI, and risk exposure. Repayments calculated at 6.89% p.a. variable, 30-year term, P&I.
Hidden Costs That Impact Your Investment
Many investors underestimate costs.
Key expenses include:
Lenders Mortgage Insurance
Stamp duty
Fees
Property management fees
Maintenance costs
Failing to account for these can significantly reduce returns.
Power of Attorney
If you are overseas or unable to attend the settlement, you might need a Power of Attorney.
This allows someone to:
Sign documents
Finalise the transaction
Without it, delays are common, and transactions might fall through.
Common Mistakes Property Investors Make
Focusing on interest rates
Ignoring the loan structure
Underestimating costs
Not planning for vacancies
Overestimating income
Your Trusted Partner for Investment Loans
A good plan for investing in property is not about purchasing a property. It’s about getting your loan set up properly, from the beginning.
With an approach, you can:
Get the most out of how much you can borrow
Lower your expenses
Create a property portfolio that can grow
