Top 10 Ways to Structure Your Investment Apartment Loan

Investment Loan Application: What Lenders Assess First

Lenders apply a different serviceability calculation to investment apartment purchases than they do to houses or townhouses. Income shading, loan-to-value caps and body corporate levies all reduce what you can borrow, and each lender treats these factors differently.

Consider a buyer purchasing a two-bedroom apartment in Richmond for use as a rental property. The lender assumes the property will remain vacant for part of each year and reduces the assessed rental income by 20 per cent. If the apartment generates $2,600 per month in rent, the lender applies serviceability on $2,080. Body corporate fees of $1,400 per quarter are deducted in full. The net assessable income becomes $1,013 per month before interest.

The same buyer applying for finance on a house in Carnegie would see rental income shaded at the same 20 per cent, but without the body corporate deduction the net assessable income would be higher by more than $100 per week. That difference can reduce borrowing capacity by $70,000 to $90,000 depending on the lender and the buyer's other commitments.

Variable rate products generally allow unlimited additional repayments and redraw, which matters when rental income fluctuates or when you plan to use surplus cash flow for portfolio growth. Fixed rate products lock in repayments but restrict prepayment flexibility. Most investor loans in our experience are written on variable rates or a 50/50 split.

How the Loan-to-Value Ratio Affects Your Deposit and LMI

Most lenders cap investment apartment loans at 90 per cent loan-to-value ratio, and some apply an 80 per cent limit for apartments in buildings over 20 storeys or with a single commercial tenant occupying more than 40 per cent of the floor area.

Lenders Mortgage Insurance is charged on any loan above 80 per cent LVR. For an apartment, LMI on a 90 per cent loan can add $15,000 to $25,000 to the upfront cost depending on the property value and whether the lender uses a tiered or continuous premium structure. That premium can be capitalised into the loan amount, but doing so increases the ongoing interest cost and may push the loan above the lender's maximum LVR once fees are added.

Some lenders offer low LMI loans or reduced premium rates for professionals in certain occupations. Others waive LMI entirely at higher LVRs under specific employer or industry arrangements. These products are not advertised on rate comparison sites and require direct broker access to the lender's commercial desk.

Interest Only Repayments: When They Work and When They Don't

Interest only investment loans reduce the monthly repayment and preserve cash flow, which can be reinvested into additional property or used to service other borrowings.

A $600,000 loan at current variable rates on a principal and interest structure will require a monthly repayment around $3,800 to $4,000. The same loan on interest only terms reduces the repayment to approximately $2,500 per month. The difference of $1,300 to $1,500 each month can be directed toward building a deposit for a second property or held in an offset account linked to the loan.

Interest only periods are typically approved for five years, after which the loan converts to principal and interest unless you refinance or request an extension. Lenders assess extensions at the time of request and may decline if your circumstances have changed or if the property's value has declined.

From 1 July 2027, properties purchased after 7:30pm AEST on 12 May 2026 that are not eligible new builds will have rental losses quarantined under the negative gearing changes in the Treasury Laws Amendment (Tax Reform No. 1) Act 2026. Those losses can only offset future rental income or capital gains on residential property. Interest only structures will still reduce cash flow pressure, but the deduction can no longer be claimed against salary or wages. Properties purchased before that date and time continue under the existing negative gearing rules.

Investment Loan Features That Matter for Apartment Owners

Offset accounts, redraw facilities and portability clauses determine how much flexibility you retain once the loan settles.

An offset account linked to the loan reduces the daily interest calculation without requiring you to pay funds directly onto the loan. If you hold $40,000 in the offset and owe $600,000, you pay interest on $560,000. The balance remains accessible, which is useful when managing vacancy periods, urgent body corporate levies or funding works within the apartment.

Redraw allows you to withdraw any additional repayments made above the minimum. Not all lenders allow redraw on investment loans, and some charge a fee per withdrawal or impose a minimum redraw amount. Portability lets you transfer the loan to a different security if you sell the apartment and purchase another investment property without discharging and rewriting the facility.

When comparing investment loan options, confirm whether the product includes these features as standard or whether they incur additional cost.

What Happens When You Want to Refinance or Expand Your Portfolio

Refinancing an investment apartment loan can unlock equity for further purchases, reduce the interest rate or switch from interest only to principal and interest as your strategy evolves.

If the apartment has increased in value since purchase, a refinance allows you to access that equity without selling. A property purchased for $550,000 that is now valued at $650,000 provides $100,000 in equity. At 80 per cent LVR, you can borrow up to $520,000 against that property. If your current loan balance is $480,000, you can release $40,000 in usable equity to fund a deposit on a second property or to renovate and increase the rental yield.

Lenders assess investment loan refinance applications using current income, existing debt and updated serviceability buffers. If your borrowing capacity has reduced due to rate increases or changes in employment, the refinance may be approved at a lower amount than expected or declined altogether. Running a refinance assessment before committing to a second purchase avoids wasted conveyancing and pest inspection costs.

Debt-to-Income Limits and Portfolio Growth from February 2026

The APRA debt-to-income cap introduced on 1 February 2026 restricts the volume of loans each lender can write at six times income or above. This cap applies separately to investor and owner-occupier portfolios.

If your gross household income is $150,000, a debt-to-income ratio of six times equates to total borrowings of $900,000. If you already have an owner-occupied loan of $500,000, adding a $500,000 investment loan takes your total debt to $1,000,000 and a DTI of 6.67. That application will fall within the lender's restricted quota and may be declined even if serviceability is met.

Some lenders manage the cap by steering high-DTI applicants toward lower loan amounts or requiring larger deposits. Others apply internal overlays and decline applications above a DTI of 5.5 regardless of the regulatory cap. When expanding your property portfolio, structuring loans across multiple lenders can keep each facility within the cap and preserve access to future credit.

Tax Treatment and Claimable Expenses on Investment Apartments

Interest on borrowings used to acquire or hold the rental property is deductible. Body corporate fees, council rates, water charges, property management fees, landlord insurance and depreciation on fixtures and fittings are all claimable.

For properties acquired on or after 7:30pm AEST on 12 May 2026 that are not eligible new builds, rental losses are quarantined from 1 July 2027 and can only offset residential rental income or capital gains on residential property. Properties acquired before that date and time continue under existing negative gearing rules and losses can be offset against other assessable income including salary and wages.

Eligible new builds include dwellings constructed on previously vacant land and properties where the number of dwellings has increased. A new apartment building completed on land that previously held a car park qualifies. A knock-down rebuild that replaces one dwelling with one dwelling does not. If a new build is occupied for more than 12 months before being sold to a subsequent investor, that subsequent investor loses access to negative gearing for that property.

The capital gains tax discount is also changing from 1 July 2027 under the same legislation. Gains accrued before that date continue under current rules. For gains accruing after 1 July 2027, the 50 per cent discount is replaced with cost base indexation and a minimum 30 per cent tax rate on real gains. Eligible new builds can elect between the old discount and the new indexed method. Seek advice from a licensed tax specialist before finalising any purchase.

Choosing Between Variable, Fixed and Split Rate Structures

Variable rates give you full access to offset accounts, unlimited additional repayments and the ability to refinance without break costs. Fixed rates lock in repayments for one to five years but restrict prepayments and charge exit fees if you sell or refinance early.

In a scenario like this: an investor purchases a $580,000 apartment in South Yarra, borrows $520,000 at 80 per cent LVR and expects to hold the property for at least seven years. She splits the loan 50/50, fixing $260,000 for three years and leaving $260,000 on a variable rate with a full offset. Rental income and surplus cash flow are directed into the offset, reducing interest on the variable portion. The fixed portion provides repayment certainty during the first three years. At the end of the fixed term, she can refix, move the entire balance to variable or refinance to release equity.

A split structure balances certainty and flexibility but requires two loan accounts and may incur two sets of fees. Not all lenders allow splits on investment loans, and some require each portion to be at least $150,000.

Applying for an Investment Apartment Loan: Documents and Timing

Lenders require recent payslips, tax returns if you are self-employed, a rental appraisal or current lease, body corporate financial statements and a copy of the strata plan or owners corporation records.

Body corporate records are assessed for sinking fund balances, planned major works and any outstanding levies. If the sinking fund is depleted and the building requires facade repairs or lift replacement, the lender may decline the application or reduce the maximum LVR. Some lenders exclude buildings with combustible cladding or active rectification orders until works are complete and certified.

Conditional approval is typically issued within 48 hours if the application is submitted with complete documentation. Formal approval and settlement can take three to five weeks depending on the lender's valuation panel and whether any special conditions are required. If you are purchasing off the plan, the loan is reassessed at settlement and the lender will require an updated valuation, income verification and serviceability check at that time.

For tailored advice on structuring your investment property finance to suit your situation and growth objectives, call one of our team or book an appointment at a time that works for you.

Frequently Asked Questions