How investment home loans differ from living in the property

Investment-purpose lending

The purpose of the loan is a fact in the credit contract. If you will not live in the property as your principal home, lenders generally classify it as investment. That can affect the rate, the maximum LVR, acceptable property types and how rental income is counted. Calling a property an “investment” in conversation does not change a loan that was written as owner-occupied, and the reverse is also true.

Deposits and equity

Some buyers use savings. Others use equity in an existing home, by refinancing or taking a further advance, then applying that equity as the deposit on the investment. That is still credit. It changes the LVR on the security property and on the new property. The Broker Room does not calculate how much equity a lender would release.

Rental income, at a high level

Some lenders may count part of expected rent when they assess a new investment loan. They often do not count 100% of advertised rent. Shading, vacancy assumptions and evidence rules are a matter of lender policy, not a tax rule. This site does not estimate rental yield or serviceability.

Lender assessment, at a high level

An investment application is still a credit assessment: income, expenses, existing debts and the security. Some lenders may require a larger deposit, shade rental income, or apply different LVR caps than they would for the same person buying a home to live in. Lender policy differs. This page only names the moving parts.

Interest structures

Investment loans can be principal-and-interest or interest-only for a period, and they may include offset or redraw depending on the product. Interest-only can change cash flow during the interest-only period and the repayment required afterwards. Whether interest is deductible is a tax question for an accountant or the ATO, not for this website and not for a repayment calculator.

Purchase costs still apply

Buying an investment property still involves transfer duty, registration and any mortgage registration. First-home concessions generally do not apply to an investment. Foreign purchaser surcharges can apply in South Australia where the buyer is a foreign purchaser under the state rules. Use the state calculators rather than assuming an owner-occupier outcome.

SA stamp duty calculator keeps ordinary duty, surcharges and registration on separate lines. The property plan can place those charges next to funds you enter.

What this page will not do

It will not estimate tax deductions, negative gearing, depreciation, capital gains or whether an investment is “worth it”. Those depend on your tax position and on facts a website should not invent. If you want the vocabulary of the loan itself, use the glossary and home loans explained.