Quick answer
An investment property loan finances a property you plan to rent out rather than live in. Lenders assess your income, your existing debts, the property and the expected rent. Ownright Custom Finance arranges investment loans Australia-wide, including for self-employed investors, larger portfolios and properties that sit outside normal bank policy.
Key points
- Lenders weigh your whole financial picture, not just the new property's rent
- Self-employed and portfolio investors often need a lender outside the usual bank queue
- Equity in a property you already own can fund a deposit, with the structure planned first
- Interest-only and principal-and-interest suit different strategies
- Suits
- Buy-and-hold investors, growing portfolios, self-employed buyers
- Security
- The investment property, sometimes with equity in another property
- Structure
- Interest-only or principal and interest, depending on the plan
- Australia-wide
- Yes
What is an investment property loan?
An investment property loan is finance used to buy, or refinance, a property that you intend to rent out. It is a different product from an owner-occupier home loan because the lender is thinking about two things at once: whether you can service the debt, and whether the property is a sound piece of security.
If you are buying your second, fifth or tenth property, or you are self-employed and the numbers do not fit a standard template, the loan can become more of a puzzle than the purchase. That is where Ownright Custom Finance spends a lot of its time. Trevor Scott has more than 40 years in finance, and the team arranges investment lending right across Australia.
How do lenders look at an investment loan?
Lenders build a picture from several moving parts. Understanding them helps you decide on a budget before you fall in love with a listing.
- Your income. Wages, business profit, rental income from other properties and any other regular income. Self-employed income is usually assessed over a longer window.
- Existing debts. Home loans, other investment loans, car finance, personal loans and credit card limits all count, including limits you never use.
- Rental income from the new property. Many lenders count only a portion of expected rent, allowing for vacancies and costs.
- A repayment stress test. Prudential regulator APRA has kept its serviceability buffer at 3 percentage points as of its May 2026 announcement. Lenders regulated by APRA add that buffer to the loan rate when testing whether you could cope if rates rose.
- The security. Location, type of dwelling, size and condition all feed into how the lender sees the risk.
APRA also keeps debt-to-income limits in its toolkit for banks and similar institutions, with a share of new lending allowed at high multiples of income. Those settings tend to make mainstream lenders conservative with investors who are already carrying plenty of debt.
Who does this suit?
Investment loans through Ownright are most often a fit for:
- Investors adding a property to an existing portfolio and finding that serviceability is tightening.
- Self-employed buyers whose taxable income undersells how the business is actually travelling.
- People using equity in their home to fund the deposit on a rental.
- Buyers purchasing something a bank sees as unusual, such as a small apartment, a dual-occupancy property or a house on acreage.
- Investors refinancing an existing rental to free up cash or fix a loan that no longer suits.
If you are a first-time investor with a stable job and a healthy deposit, a mainstream lender may be perfectly workable. We will tell you if that is the case.
Mid-page check: want a second opinion on your numbers?
If a lender has knocked back a rental purchase, or you are not sure how your existing debts will be counted, start your enquiry here and we will go through it with you.
Interest-only or principal and interest?
Investors choose between the two for strategic reasons rather than because one is better.
| Feature | Interest-only | Principal and interest |
|---|---|---|
| Repayments in the early years | Lower, because you are not paying down the balance | Higher, because the balance reduces |
| Equity building | Relies on property growth | Builds through repayments as well |
| How lenders assess it | Usually tested over the shorter remaining principal-and-interest term, which can reduce borrowing capacity | Tested over the full term |
| Common reason to choose it | Cash flow, or paying down a home loan first | Long-term hold with a plan to own it outright |
The ATO says you can claim deductions for rental expenses when a property is rented out or genuinely available to rent on commercial terms. How loan interest is treated depends on how the borrowed money is used, so structure matters. Your accountant is the right person for the tax side, and we are happy to work alongside them.
What about using equity from another property?
Many investors fund the deposit for the next purchase from equity in a home or an existing rental. Done carefully, it can avoid draining savings. Done carelessly, it can tie several properties together under one lender and limit your options later.
A few questions we work through before recommending a structure:
- Should the equity release be a separate loan from the purchase loan, so the arrangement stays tidy?
- Is it better to borrow against the home, or against the existing rental?
- What happens to flexibility if you want to sell one property but keep the other?
Our home equity loan page and the equity calculator are good places to start if you want to see how much usable equity you might have.
How does Ownright approach investment lending?
We start with the outcome you want, which might be cash flow, long-term capital growth or building a base to retire on, and work backwards. Because we are not tied to one lender, we can compare policies on things like how rent is shaded, how self-employed income is averaged and how many investment loans a lender is comfortable with.
If your situation is trickier than average, we look beyond the obvious. Some lenders are comfortable with variable income. Some will consider a smaller deposit with extra security. Some understand rural or lifestyle property that a city-focused bank mistrusts. Finding those options is the point of using a broker who deals with difficult cases every week.
An illustrative example
This scenario is illustrative only and does not describe a real client.
A self-employed electrician has built up equity in the family home and wants to buy a townhouse to rent out. Their latest tax return is lower than the year before because they bought a work vehicle and claimed depreciation. The bank they have used for years reads that return at face value and declines to go further.
Ownright looks at the full picture: both years of returns, the business activity statements and the actual cash flow. We find a lender whose policy adds back certain deductions and arrange the equity release and the purchase loan as two clean pieces. The result is a plan that matches how the business really earns, not how a single tax return makes it look.
Common mistakes to avoid
- Signing a contract before checking how your existing debts will be counted.
- Applying to several lenders in quick succession and leaving a trail of credit enquiries.
- Forgetting about holding costs such as council rates, land tax, insurance and maintenance. State revenue offices publish land tax rules for each state.
- Tying every property to one lender without thinking about future flexibility.
- Underestimating the time needed for a valuation and for finance approval when the contract has a deadline.
What documents should I have ready?
- Photo ID and recent payslips, or your last two years of tax returns and notices of assessment if self-employed.
- Business activity statements if you are in business.
- Statements for every loan and credit card.
- A rental appraisal or lease for the property, where available.
- The contract of sale, or the property address if you are still searching.
- Evidence of savings and, if you are using equity, the details of that property.
Ready to talk about your next property?
Whether it is your first rental or a growing portfolio, apply online or call Ownright Custom Finance on 03 7043 7233. We are based in Knoxfield, Victoria, and work with investors in every state and territory. For related reading, see our guide on how much you can borrow when self-employed.
How it works, step by step
- 1
Step 1
A conversation with Trevor Scott's team about your income, existing loans and what you want the property to do for you.
- 2
Step 2
We map out how lenders will see your position, including how rent and existing debts are likely to be treated.
- 3
Step 3
We match the deal to a lender whose policy suits it, which may not be the lender you already bank with.
- 4
Step 4
We organise documents, manage the valuation and contract timelines, and keep you updated through to settlement.
Frequently asked questions
How do lenders assess an investment property loan?
Lenders look at your income, living expenses, existing loans and the rental income the property is expected to earn. Many lenders count only part of the rent and then test repayments at a higher rate than the one you pay. The security property and its location also matter.
Can I use equity in my home to buy an investment property?
Often, yes. Equity in a property you own can be used towards the deposit and costs of a new purchase. How the loans are structured affects flexibility later, so it is worth planning the arrangement before you sign a contract rather than after.
Can a self-employed person get an investment loan?
Yes. Self-employed investors can borrow, though lenders want proof of income and may treat it differently from wages. Where tax returns are thin or recent, alternative documentation or a different lender can open doors. Ownright works with self-employed investors Australia-wide.
Should an investment loan be interest-only?
It depends on the plan. Interest-only keeps repayments lower for a set period, which some investors prefer for cash flow. Principal and interest builds equity faster. Lenders treat the two differently when assessing serviceability, so the choice is worth discussing early.
What if a bank has capped how many properties I can hold?
Some lenders limit exposure to a single borrower or the number of investment loans. That does not mean the door is shut everywhere. Other lenders have different appetites, and Ownright looks for the one whose policy suits a growing portfolio.
Can I buy an investment property in a self-managed super fund?
It is possible, but the rules and loan structure are specific. Have a look at our SMSF property loans page for the detail, and talk to us about whether that route fits your situation.
Do I need a valuation before applying?
Lenders typically arrange their own valuation of the security property as part of the assessment. You do not usually need to commission one first, though a recent appraisal can help you set a realistic budget.