When to Use an Investment Loan for a Burwood Apartment

An investment loan for a Burwood apartment gives you access to borrowing structured specifically for rental income, tax deductions and portfolio growth.

Burwood's apartment market is anchored by two major retail and residential precincts: Burwood One and Burwood Brickworks. These developments have delivered a steady supply of one and two-bedroom apartments within walking distance of Burwood station, attracting tenants employed in Monash Health, Deakin University and the Box Hill commercial precinct. Vacancy rates in the area remain low, which supports consistent rental income for landlords holding well-located stock.

Why Investor Loan Structure Matters Before You Settle

Investor loan structure determines how much you can borrow, what you pay in interest, and what you can claim as a deduction. Lenders assess investment loans using rental income at a discounted rate, typically 80 per cent of the expected rent. They also apply a serviceability buffer, currently 3.0 percentage points above the loan product rate, to confirm you can meet repayments if rates rise. This means your borrowing capacity for an investment property is generally lower than it would be for an owner-occupied purchase at the same income level.

Consider a buyer who earns a gross salary and already holds an owner-occupied loan. They want to purchase a two-bedroom apartment in Burwood as an investment. The lender will assess rental income at 80 per cent of market rent, apply the serviceability buffer, and calculate borrowing capacity after accounting for existing debt. In our experience, this often reduces available loan amount by 15 to 20 per cent compared to an owner-occupier scenario, even where the buyer has strong equity in their home. Selecting the right investment loan product early in the process allows you to adjust deposit or property selection before you commit.

Interest Only Repayments and Cash Flow

Interest-only repayments reduce your monthly outgoing during the interest-only period, which can range from one to five years depending on the lender and loan-to-value ratio. During this period, you pay only the interest charged on the loan balance. No principal is repaid, so the loan balance does not reduce. This structure suits investors focused on maximising cash flow and tax deductions in the early years of ownership.

Interest on borrowings used to purchase or hold a rental property is deductible against assessable income, including salary and wages, for properties held before the legislative change that took effect from the 2027-28 income year. For apartments purchased after that date, different rules apply depending on whether the property qualifies as an eligible new build. Investors should seek advice from a licensed tax specialist to confirm how the timing of purchase and settlement affects deduction treatment.

Loan to Value Ratio and Lenders Mortgage Insurance

Loan to value ratio is the loan amount expressed as a percentage of the property's value. Lenders generally require you to pay for Lenders Mortgage Insurance where the LVR exceeds 80 per cent. LMI protects the lender if you default and the property is sold for less than the outstanding loan balance. The premium is calculated on a sliding scale based on loan amount and LVR, and in some cases you may be able to capitalise the premium into the loan balance rather than paying it upfront.

For a Burwood apartment purchased with a 10 per cent deposit, the LVR would be 90 per cent. LMI premium at this level typically ranges from 2 to 4 per cent of the loan amount, depending on the lender and whether you qualify for any professional or industry discount. Some lenders offer reduced LMI for certain occupations or for investors refinancing from another institution. AXTON Finance can access low LMI loan options across multiple lenders, which may reduce your upfront cost if you are borrowing above 80 per cent LVR.

Body Corporate Fees and Lender Assessment

Body corporate fees are a regular holding cost for apartment owners and must be disclosed during the loan application. Lenders include these fees in their serviceability assessment, which means higher body corporate fees reduce your borrowing capacity. Burwood apartments in newer developments with shared gyms, pools and concierge services may have quarterly body corporate fees ranging from $1,200 to $2,500 or more, depending on the building and the level of amenity.

As an example, a buyer applying for finance on a one-bedroom apartment in the Burwood Brickworks precinct with quarterly body corporate fees of $1,800 will see those fees treated as a committed expense by the lender. Over a year, that amounts to $7,200 in non-deductible outgoings that reduce the amount available to service the loan. Body corporate fees are deductible for tax purposes when the property is rented or genuinely available for rent, but lenders assess them as a cost that competes with loan repayments regardless of tax treatment.

Fixed Rate or Variable Rate for Investment Loans

Fixed rate investment loans lock in your interest rate for a set period, typically one to five years. Variable rate investment loans allow your rate to move up or down in line with lender pricing decisions. Each structure has different implications for flexibility, cost and deduction timing.

Fixed rates provide certainty over repayments and deductions during the fixed period, but they generally come with restrictions on extra repayments and may incur break costs if you repay the loan early or refinance before the fixed term ends. Variable rates offer full flexibility to make extra repayments or refinance without penalty, and they allow you to access features such as offset accounts and redraw. For investment loans, offset accounts linked to a variable rate loan allow you to reduce interest charged without reducing the loan balance, which preserves the deductibility of interest on the full loan amount.

In our experience, investors who plan to hold a Burwood apartment for the medium term and want to maintain the option to sell, refinance or access equity within three years typically favour variable rate loans. Those focused on budgeting certainty and who do not expect to make changes during the first few years may prefer a fixed rate or a split structure combining both.

Equity Release from Your Home to Fund the Deposit

Equity release allows you to borrow against the value of your existing home to fund the deposit and settlement costs for an investment property. This strategy is common among Burwood residents who have built equity in their owner-occupied property and want to purchase an apartment without selling other assets or drawing down savings.

When you release equity, the lender assesses your total borrowing across both properties and applies serviceability tests to the combined debt. The equity loan is typically structured as a separate split secured against your home, with interest-only repayments to maximise tax efficiency. Interest on borrowings used to purchase an investment property is deductible, even where the loan is secured against your home rather than the investment property itself, provided the funds are used for the investment purpose.

Debt to Income Lending Limits from February 2026

From 1 February 2026, Australian banks and credit unions are subject to a limit on lending to borrowers with a total debt-to-income ratio of six times gross income or greater. Each lender may make up to 20 per cent of new investor loans to borrowers above this threshold, measured quarterly. The limit applies separately to owner-occupier and investor lending and does not affect existing loans.

For a Burwood investor with gross household income and existing owner-occupied debt, adding a new investment loan may push total debt above six times income. Where this occurs, the lender may still approve the loan provided it falls within their quarterly allocation and meets all other serviceability criteria. However, loan approval may take longer, and some lenders may decline applications that would have been approved under the previous framework. Buyers in this position should discuss loan structure and timing with a mortgage broker before signing a contract.

Stamp Duty and Claimable Expenses on Settlement

Stamp duty on an investment property purchase in Victoria is calculated using the standard residential rate, which increases progressively with purchase price. Stamp duty is not deductible and must be paid from your own funds or capitalised into the loan where the lender permits and LVR allows. Settlement costs including conveyancing, building and pest inspections, and loan establishment fees are also typically paid upfront, though some of these costs may be deductible or added to the cost base for capital gains tax purposes.

Ongoing costs such as council rates, landlord insurance, property management fees, repairs and interest are deductible in the year they are incurred, provided the property is rented or genuinely available for rent. Investors should keep records of all claimable expenses and seek advice from a registered tax agent on how to structure deductions and depreciation schedules.

Call one of our team or book an appointment at a time that works for you. AXTON Finance works with clients across Burwood and surrounding suburbs to structure investment property finance that supports your portfolio growth and cash flow objectives.

Frequently Asked Questions