What Are Your Investment Loan Options in Caulfield South?

The right investment loan structure matters as much as the property you choose. If you live in Caulfield South and are thinking about buying an investment property, the loan you pick will shape your cash flow, your tax position and how far your borrowing can stretch.

This guide covers the decisions that come before you make an offer: which loan structure suits you, how lenders assess your borrowing, and how the current tax rules affect your plans.

What Are the Main Investment Loan Options?

Most investment loans come down to two choices: the rate type (variable or fixed) and the repayment type (interest only or principal and interest). Each choice has a trade-off, and many investors combine them.

A variable rate moves with the lender's pricing, so your repayments can rise or fall. A fixed rate locks in your repayment for a set period, which helps with budgeting, but fixed loans can limit extra repayments or offset features depending on the lender. Some investors split the loan, fixing one portion and leaving the other variable. The cost of splitting is that you manage two balances and two sets of features.

An offset account can also reduce the interest charged on the loan. Because less interest is charged, the interest you can claim as a deduction is lower too. The saving is real, but it is not a tax gain.

Our investment loans page outlines the structures we regularly set up for investors. A broker can also help you access investment loan options from banks and lenders across Australia, so you are not limited to one lender's product range.

How Much Can You Borrow for an Investment Property?

Your borrowing amount depends on your income, existing debts, living costs and the lender's assessment rate, which banks must set at least 3.0 percentage points above the loan's actual rate. This buffer applies to new borrowers at banks, credit unions and building societies regulated by APRA.

Using our illustrative rate of 6.75% p.a., a bank would test your ability to repay at 9.75% p.a. Rental income helps, but APRA's guidance expects lenders to count no more than 80% of expected rent. Lenders also set their own rules on whether they accept a rental appraisal for a property you have not yet bought.

Deposit size matters too. Borrowing above 80% of the property's value, known as the loan-to-value ratio (LVR), generally requires Lenders Mortgage Insurance (LMI), which you pay as the borrower. The 80% mark is not a legal limit. It is the point where LMI is generally required, and each lender sets its own caps above it.

APRA also limits how much of each bank's new lending can be at six times income or more. That limit applies to the bank's overall portfolio, not to you as an individual, and lenders still assess every application on its own merits. You can get a rough starting figure on our borrowing capacity page before speaking with us.

Interest Only vs Principal and Interest: What Changes?

Interest-only repayments are lower in the early years, but they do not reduce your loan balance, and the repayments rise when the loan reverts to principal and interest. Principal and interest repayments cost more each month, but they pay the debt down from the start.

As an example, consider an investor with a $600,000 investment loan at an illustrative 6.75% p.a. over 30 years. On interest only, repayments would be about $3,375 a month, and the balance would stay at $600,000. On principal and interest, repayments would be about $3,892 a month.

Suppose this investor chooses five years interest only to keep cash flow comfortable while the tenancy settles in. When the loan reverts, repayments are calculated over the remaining 25 years. At the same 6.75% rate, they would rise to about $4,145 a month, roughly $770 more than during the interest-only period. The investor plans for that jump by saving the monthly difference in an offset account, so the step up does not come as a surprise.

Two points are worth knowing. Lenders assess interest-only loans on the principal and interest repayments over the shorter remaining term, so an interest-only period does not lift your borrowing power. And only the interest portion of repayments is deductible under either structure. The repayments page explains how these figures are calculated.

How Do the New Negative Gearing Rules Affect Investors?

Negative gearing rules now depend on when you acquired the property and whether it is an established home or an eligible new build. Speak with your accountant before you buy, because the tax outcome depends on your circumstances and is not certain.

Losses on residential investment properties held at 7:30pm AEST on 12 May 2026, including those under contract awaiting settlement, remain fully deductible against other income, such as salary, until the property is sold. Losses from eligible new builds acquired after that date can also still be deducted against all income.

From the 2027-28 income year, net rental losses on established residential properties bought after that time can only be offset against other residential property income, including residential capital gains. Excess losses can be carried forward. Properties bought between 12 May 2026 and 30 June 2027 can still be negatively geared under the current rules until 30 June 2027 only.

The capital gains tax discount is also changing. The 50% discount applies to gains accruing before 1 July 2027. After that date, the discount is replaced by cost base indexation and a 30% minimum tax rate on real gains. This is why your holding period and exit plan belong in the conversation before you buy.

The main trade-off is that a new build may keep more tax flexibility, but you carry construction and completion risk. If building appeals, our construction loans page explains how those loans work.

Can You Use Home Equity to Buy an Investment Property?

Yes, many investors use equity in their existing home as the deposit, subject to the lender's approval and valuation. The cost is that your home becomes security for more debt, and your total borrowing may push past the 80% LVR mark where LMI applies.

How you use the funds also affects your tax position. The ATO looks at what the borrowed money is used for, not the property that secures the loan. If you borrow against your home to buy an investment property, the interest on that portion is generally deductible. If you redraw part of it for a holiday, that part is not.

For this reason, we usually suggest keeping investment borrowings in a separate loan from personal borrowings. If you already have a loan in Caulfield South, a refinance may be the way to release equity and restructure at the same time. Your accountant can confirm how this applies to you.

Victoria also charges stamp duty on property purchases, which affects how much cash you need at settlement. Our stamp duty page is a good place to start.

Call one of our team or book an appointment at a time that works for you. We will review your goals, your equity and your borrowing position, then compare options across a wide range of lenders so you can move on a property with confidence.

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