Avoid These 5 Mistakes When Buying Investment Property

Investment Loans for Established Property: What Changes in 2026 Mean for Annerley Buyers

An investment loan for an established property lets you borrow funds to purchase a dwelling that already exists, rather than one under construction or off-the-plan. Since mid-2026, changes to negative gearing and capital gains tax rules have altered the financial outcome for investors buying established dwellings, so understanding which properties qualify as "established" and which are exempt matters before you sign a contract.

Properties held at 7:30pm AEST on 12 May 2026, including those under contract awaiting settlement at that time, continue to allow full deductibility of losses against other income until the property is sold. If you purchased an established investment property in Annerley before that date, the legislation does not affect your current arrangement. For contracts signed after that date, losses from the 2027-28 income year onward are deductible only against other income from residential properties, including capital gains on residential properties, with excess losses carried forward.

Eligible new builds, including dwellings constructed on previously vacant land and properties where the number of dwellings increases, remain fully exempt from the negative gearing restrictions. A post-war Queenslander on Waldheim Street split into two separate titles would qualify. A knockdown rebuild on Ipswich Road that replaces one dwelling with one dwelling would not.

Deposit Requirements and Loan to Value Ratio

Lenders mortgage insurance is generally required by authorised deposit-taking institutions on residential loans where the loan-to-valuation ratio exceeds 80 per cent. Most lenders writing investment loans in Annerley will lend up to 90 per cent of the property value for established dwellings, meaning you need a deposit of at least 10 per cent plus costs. Some lenders cap investor lending at 80 per cent LVR, particularly where the borrower has multiple investment properties or limited serviceability.

LMI is calculated on a sliding scale based on loan amount and LVR. A borrower taking out a loan at 85 per cent LVR will pay a lower premium than one at 90 per cent, even if the loan amounts are identical. The premium is a one-off cost, usually added to the loan balance, though some investors pay it upfront to reduce the total interest paid over the loan term. The premium is calculated on a sliding scale based on the loan amount and LVR, and state and territory stamp duty may be payable on the LMI premium in some jurisdictions.

Serviceability and Debt-to-Income Limits Under APRA Rules

APRA requires all authorised deposit-taking institutions to assess new borrowers' capacity to service a home loan at an interest rate that is at least 3.0 percentage points above the loan product rate. This buffer has applied since October 2021 and remains in place. If you are applying for a variable rate investor loan at 6.5 per cent, the lender will assess your capacity to repay at 9.5 per cent.

Rental income from the property is included in the assessment, but lenders typically apply a shading factor of 20 per cent to account for periods of vacancy, maintenance costs and management fees. If the property generates rental income of $600 per week, the lender will credit $480 per week in the serviceability calculation.

APRA activated a debt-to-income lending limit on 27 November 2025, effective from 1 February 2026, applying to all authorised deposit-taking institutions. Each institution may lend up to 20 per cent of new investor loans to borrowers with a total debt-to-income ratio of six times or greater. Bridging loans for owner-occupiers and loans for the purchase or construction of new dwellings are excluded. If your gross household income is $120,000 and your total borrowing across all loans is $720,000 or more, you fall into the high DTI category. Most lenders still approve these applications, but the volume is capped.

Interest Rate Structure: Principal and Interest vs Interest Only

Investor loans are available with principal-and-interest repayments or interest-only repayments for a set period, typically one to five years. Interest-only loans reduce the monthly repayment during the interest-only period, which can help with cash flow if rental income does not fully cover the loan cost. Once the interest-only period ends, the loan reverts to principal and interest unless you apply to extend it.

A long-term interest-only residential loan is classified as non-standard where the LVR is greater than 80 per cent and the contractual interest-only period is greater than five years or is not specified. Non-standard loans attract higher capital requirements for lenders, which typically translates to higher interest rates or stricter lending criteria. If you want an interest-only period longer than five years, expect to provide a deposit of at least 20 per cent.

Consider a buyer who purchases a unit in Annerley at current median rates with a 15 per cent deposit. The rental income covers 80 per cent of the principal-and-interest repayment. Switching to interest-only for three years reduces the monthly payment by roughly one-third, turning a monthly shortfall into a modest surplus. After three years, the buyer refinances to a variable principal-and-interest loan, using equity growth in the property and a higher household income to absorb the increased repayment.

Variable or Fixed Rate for Investment Property

Variable rate loans allow you to make additional repayments and access offset accounts, which can reduce the interest charged on the loan. Fixed rate loans lock in the rate for a set period, usually one to five years, but restrict additional repayments and do not typically offer offset accounts. Some investors split the loan, fixing a portion and leaving the remainder variable.

Under APS 112, investor loans and interest-only loans generally attract higher risk weights than owner-occupied principal-and-interest loans at the same LVR. This flows through to pricing. At the time of writing, most lenders charge a margin of 0.3 to 0.6 percentage points higher on investor loans compared to owner-occupier loans at the same LVR and repayment structure.

Annerley sits within 7 kilometres of Brisbane CBD, close to the PA Hospital and well-serviced by the Ipswich and Beenleigh train lines. Two-bedroom units and older Queenslanders on larger blocks are common, and the area attracts a mix of students, hospital staff and young families. Vacancy rates in the inner south have remained below 2 per cent for most of the past two years, which supports rental yield but also increases competition among buyers.

Tax Deductions and Claimable Expenses on Rental Property

Interest on borrowings used to acquire or hold residential rental property is deductible against assessable income to the extent the property is rented or held to produce assessable income. Other holding costs, including council rates, insurance, property management fees, repairs and depreciation, are also deductible for the period the property is rented or genuinely available for rent.

If you borrow funds to cover the deposit or purchase costs using a line of credit or personal loan, the interest on that borrowing is deductible only if the funds were used for the investment property. Interest on borrowings for private purposes is not deductible, even if the loan is secured against the investment property.

Stamp duty is not deductible as an ongoing expense but forms part of the cost base for capital gains tax purposes. Body corporate fees for units and townhouses are deductible in the year they are incurred. Loan establishment fees can be deducted over five years or the term of the loan, whichever is shorter.

Refinancing an Investment Loan After Purchase

Refinancing lets you switch lenders or restructure your loan to access a lower rate, release equity for further investment, or consolidate debt. If your property has increased in value since purchase, you may be able to borrow additional funds without selling, provided you meet the lender's serviceability and LVR requirements.

Offset account balances do not reduce the loan amount for LVR purposes under APS 112. This means that even if you have $50,000 sitting in an offset account linked to a $400,000 loan, the lender calculates the LVR based on the full $400,000 loan balance, not the net position. When refinancing, lenders reassess your income, expenses and total debt position, applying the same serviceability buffer and DTI limits that apply to new loans.

One scenario we see regularly involves an Annerley investor who purchased a property several years ago and has since paid down the loan or benefited from capital growth. The property is now valued higher, and the investor wants to access equity to fund a second purchase. The lender will assess whether the rental income from both properties, combined with the investor's other income, can service both loans at the buffered rate. If the numbers work, the investor can proceed without selling the first property.

If you are considering a second investment purchase or want to review your current loan structure, call one of our team or book an appointment at a time that works for you.

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