What Are Your Investment Loan Options as an NDIA Employee?

If you work at the NDIA and want to buy an investment property, the loan structure you choose will shape your cash flow more than the property itself. Your steady public sector income helps, but lenders still test every application the same way.

This article covers how lenders assess an investment loan, how interest only compares with principal and interest, and what the recent negative gearing changes mean for you. It does not cover every product on the market.

How Do Lenders Assess an Investment Loan Application?

Lenders assess an investment loan by testing whether you can afford repayments at a rate well above the one you will actually pay. Banks and other APRA-regulated lenders must assess new borrowers at a rate at least 3.0 percentage points above the loan rate.

Rental income helps, but it is discounted. APRA's guidance says prudent lenders count no more than 80 per cent of expected rent, to allow for periods when the property is empty. Lenders also look closely at your existing debts, including credit card limits, even when you carry no balance. Your borrowing capacity can change noticeably once those limits are reduced or closed.

There is also a limit on very high debt-to-income lending. Each bank can write only a set share of its new loans at six times your income or more. That limit applies to the bank's overall lending, not to you personally, so individual applications are still decided under each lender's own policy.

Interest Only or Principal and Interest: Which Suits an Investor?

Interest only lowers your repayments for a set period, but it does not increase how much you can borrow and it leaves your loan balance unchanged. Principal and interest repayments cost more each month but reduce the debt over time.

Lenders test interest-only loans over the shorter remaining term. A 30-year loan with a five-year interest-only period is assessed as if you were repaying principal and interest over the remaining 25 years. That usually means a lower maximum loan than the same loan on principal and interest.

As an illustrative example at 6.75% p.a., a $600,000 loan costs $3,375 a month in interest only (600,000 x 6.75% / 12). Over 30 years on principal and interest, the repayment is about $3,891 a month. If the loan ran interest only for five years and then switched, the repayment over the remaining 25 years would be about $4,145 a month. The lower early repayment is a trade-off, because the later repayment is higher and you have not reduced the debt in the meantime. Rates vary by lender and loan structure, so use this only as a guide. See our page on interest only loans for more.

What Do the Negative Gearing Changes Mean for New Investors?

Negative gearing now depends on when you buy and what you buy. Losses on properties held at 7:30pm AEST on 12 May 2026 (including those under contract) can still be deducted against your salary until the property is sold. Eligible new builds acquired after that date can also keep this treatment.

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 may still be negatively geared under the current rules until 30 June 2027 only.

Interest on money borrowed to buy a rental property remains deductible to the extent the property is rented or available for rent. Only the interest part of a repayment is deductible, and the principal part is not. A principal and interest repayment is therefore not fully deductible. An interest-only repayment on a loan used wholly for the rental property is all interest, so it can be deducted.

This matters for your numbers. If you buy an established property now, do not build your budget around a tax refund from the loss. Run your cash flow so the property can be held on your income. Tax outcomes depend on your circumstances, so speak with your accountant before you commit.

How Capital Gains Tax Changes From 1 July 2027

From 1 July 2027, the 50 per cent CGT discount is replaced for gains accruing after that date. Cost base indexation using CPI applies instead, along with a 30 per cent minimum tax rate on the real gain.

If you hold a property before that date and sell afterwards, the gain is split. The part accruing before 1 July 2027 is taxed under the current rules, and the later part under the new rules. You can use a market valuation at 1 July 2027 or an ATO-published apportionment formula. For eligible new builds, you can elect either approach. Your accountant can model which suits your situation.

Using Equity From Your Home to Buy an Investment Property

You may be able to use equity in your home as the deposit for an investment, subject to the lender's credit approval, valuation and serviceability assessment. The extra borrowing is secured against your home, which increases risk. The interest tax treatment also depends on how the borrowed money is used. Interest is deductible based on what the funds are used for, so money borrowed for the investment purchase is treated differently from money used for personal spending.

Consider a buyer who has built equity in their home and splits the borrowing into two separate loans. One loan covers the investment deposit and costs, and the other stays as the home loan. The investment loan interest is then easy to separate at tax time. The outcome is cleaner records for the accountant. The trade-off is that your total debt is higher, and lending above 80 per cent of a property's value generally needs lenders mortgage insurance, which is a cost you pay. Each lender sets its own limits. Read more on equity release before you decide.

An offset account lowers the interest charged, so it also lowers the interest you can claim. It does not reduce the loan balance. The benefit is that you keep your cash accessible while paying less interest.

What Should You Check Before Refinancing an Existing Investment Loan?

Before refinancing an investment loan, compare the full cost of switching against the saving, not just the headline rate. Refinancing costs, discharge fees and valuation fees vary by lender, so ask for them in writing.

As an example, consider an NDIA employee who bought an investment property several years ago and has not reviewed the loan since. Their rate has drifted higher than what new customers are offered. They ask a broker to compare options and find a lender offering a lower rate on the same structure. After weighing up the switching costs against the monthly saving, they move the loan and put the monthly saving into their offset account. The result is lower interest and a clearer path to growing the portfolio. A loan health check is a good place to start, and our investment loan refinancing page explains how it works.

If you are earlier in the journey, buying your first investment property covers the starting point.

Call one of our team or book an appointment at a time that works for you.

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