If you work at Home Affairs and want to buy an investment unit, the loan structure matters as much as the unit itself. Lenders, tax rules and your own cash flow all shape what you can borrow and keep.
This article covers how lenders assess an investment loan application, how interest-only repayments really work, and what the recent negative gearing changes mean for a unit purchase.
How Much Can You Borrow for an Investment Unit?
Your investment loan amount depends on your income, existing debts, living costs and the rent the unit is expected to earn. Banks must also test your ability to repay at a rate at least 3.0 percentage points above the loan's actual rate.
That buffer applies to banks, credit unions and building societies regulated by APRA. It means your repayments are assessed at a much higher rate than the one you will actually pay. Existing debts matter too. Lenders look at the balance, rate and term of each loan, and they apply a notional repayment to credit card limits, whether you use them or not.
Rental income helps, but only part of it counts. APRA's guidance expects lenders to count no more than 80 per cent of expected rent, to allow for vacancy, but each lender sets its own policy. Lenders also tend to rely less on a rental appraisal than on actual rent received.
Home Affairs roles often include allowances, shift loadings or overtime. Lenders treat these differently, so it pays to know how each one is assessed before you apply. Our home loans for Home Affairs employees page explains how we approach that, and the borrowing capacity calculator gives you a starting figure.
Interest Only or Principal and Interest: What Changes?
An interest-only loan lowers your repayments for a set period, but it does not raise how much you can borrow. Lenders assess it as if you will repay principal and interest over the shorter remaining term, which usually gives a lower maximum loan.
Consider an investor with a $500,000 loan, using an illustrative rate of 6.75% p.a. over 30 years. Interest-only repayments would be about $2,813 a month. Principal and interest over the full 30 years would be about $3,243 a month.
Now say the investor takes five years of interest-only. The balance is still $500,000 at the end of that period. Repayments then switch to principal and interest over the remaining 25 years, at about $3,455 a month at the same rate. That is roughly $212 a month more than if they had paid principal and interest from day one.
The outcome is a trade-off. The investor keeps about $430 a month during the first five years, but then pays more each month and has not reduced the debt. If rents fall or the unit sits empty, that higher repayment can strain the budget. Our interest-only loans for public servants page covers when this structure suits.
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Book a chat with a Finance and Mortgage Brokers at Public Home Loans today.
What Does the Deposit Look Like on an Investment Unit?
There is no government rule that sets a minimum deposit for an investment unit. Each lender sets its own limits, and borrowing above 80 per cent of the property's value generally needs Lenders Mortgage Insurance (LMI).
LMI is paid by you, and it protects the lender rather than you. The cost depends on the loan amount and the loan-to-value ratio (LVR), and you may also pay stamp duty on the premium in some states and territories. A smaller investor deposit therefore means a larger upfront cost and a larger debt.
Some lenders waive LMI for certain occupations, but eligibility depends on the lender and the insurer. It is worth asking early whether an LMI waiver for public servants applies to your situation, and what the trade-off is. Even with a waiver, a higher LVR means a bigger loan and more interest.
If you already own a home with equity, using that equity for the deposit needs lender approval and must pass the lender's serviceability test. Each lender sets its own equity and LVR limits. It also increases the debt secured over your home, and if your total borrowing goes above 80 per cent LVR, LMI may be needed. For tax, interest is deductible only for the part of the borrowing used to buy the rental unit. Any part used for private purposes is not deductible. Get tax advice before you draw on equity.
Negative Gearing on a Unit: What Changed in 2026?
Negative gearing rules now depend on when you buy and whether the unit is new or established. Your accountant should confirm how they apply to your circumstances.
Properties held at 7:30pm AEST on 12 May 2026, including those under contract, keep the current treatment. Losses can still be deducted against your salary until the property is sold. Eligible new builds acquired after that date can also keep deducting losses against all income.
From the 2027-28 income year, a net rental loss from an established residential property bought after that time can only be deducted against other residential property income. Unused losses carry forward. Interest itself is still deductible on a rented property, but the loss can no longer reduce your wage income.
This makes the choice between a new and an established unit more important. A new unit may qualify as an eligible new build, but a knock-down rebuild that adds no dwellings does not. A new build that has been occupied for more than 12 months before sale loses this treatment for the next investor.
Capital gains tax also changes. From 1 July 2027, the 50 per cent discount is replaced by indexing the cost base to inflation and a 30 per cent minimum tax rate on real gains from that date. Gains accruing before that date are treated under the current rules. Tax outcomes vary, so get advice from your accountant before you sign a contract.
Costs to Budget For Before You Sign
The rent is only part of the picture, because a unit carries body corporate fees, council rates, insurance, management fees and repairs. Many of these ongoing costs are deductible while the unit is rented or genuinely available for rent, but a deduction only returns part of what you spend.
Body corporate fees deserve special attention with units. Before you commit, ask for the strata records, including the sinking fund balance and any planned special levies. A building with large upcoming works can change your returns quickly.
The principal part of your loan repayment is not deductible, because it repays capital. Only the interest is. Do not treat your full repayment as a tax saving.
If you already hold an investment loan, a review may free up cash flow. Our investment loan refinancing page explains what we look at, and refinancing may involve discharge and valuation costs that vary by lender.
Where to Start if This Is Your First Investment
Your first investment purchase works best when you set your loan structure, budget and tax advice in place before you search for a unit. Our first investment property guide walks through that order.
Our broking covers mortgages for public servants across lenders in Australia, so you can compare structures, features and rate discounts rather than rely on one bank. Rate discounts vary by lender, so ask each one what it can offer on your loan.
Call one of our team or book an appointment at a time that works for your roster, and we will map out your borrowing options for an investment unit.
Frequently Asked Questions
Does an interest-only loan let me borrow more for an investment unit?
No. Lenders assess an interest-only loan as if you will repay principal and interest over the shorter remaining term, which usually lowers the maximum loan. The benefit is lower repayments during the interest-only period, not a larger loan.
How much of the rent do lenders count?
APRA's guidance expects banks to count no more than 80 per cent of expected rent, to allow for vacancy. Individual lenders set their own rules on the rental evidence they accept.
Can I still negatively gear a unit?
It depends on when you buy and whether the unit is a new build. From the 2027-28 income year, losses from established properties bought after 12 May 2026 can only be deducted against residential property income. Check your situation with your accountant.
When do I need LMI on an investment unit?
LMI is generally required when you borrow more than 80 per cent of the property's value. The cost depends on the loan amount and LVR, and eligibility for any waiver depends on the lender and insurer.
