In short: An investment property loan finances a home you will rent out rather than live in. Lenders price it slightly above owner-occupier loans, count only part of the expected rent as income, and offer interest-only terms investors often prefer for cash flow and tax. GNT Finance structures the loan, releases equity from your home if needed, and matches you to a lender whose investor policy fits.
Melbourne's northern growth corridor is one of Victoria's most active investor markets: rental demand in Craigieburn, Wollert, Donnybrook and Mickleham is strong and entry prices sit below the metropolitan median. The financing decisions you make now (structure, ownership, interest-only versus P&I, which lender) will shape your returns for a decade.
Investors we typically help
- First-time investors using equity in the family home to fund a deposit, often without cash savings.
- Rentvestors who rent where they want to live and buy where the numbers work. Our rentvesting guide explains the strategy.
- Portfolio builders who have hit a serviceability wall with their bank and need a lender that assesses rent and existing debt more generously.
- Upgraders keeping the old home as a rental when they move.
- Self-employed investors whose income needs careful presentation. See our self-employed loans page.
The GNT Finance process for investors
- Strategy conversation. Before we talk products, we ask what you are trying to achieve: yield, growth, a set number of properties, or a retirement income. The answer changes the structure.
- Equity and borrowing capacity. We calculate usable equity in property you already own and run serviceability across several lenders, because investor capacity varies enormously.
- Structure design. We decide how the deposit will be funded (cash, equity release, or cross-collateralisation, which we usually avoid), whether the loan will be interest-only, and how it will be split so that deductible and non-deductible debt never mix.
- Pre-approval. So you can bid at auction or negotiate a private sale with confidence.
- Purchase and settlement. We finalise the loan, coordinate with your conveyancer and review the loan again after twelve months.
Loan structures and how they compare
| Feature | Interest-only | Principal and interest | Equity release loan |
|---|---|---|---|
| Monthly cost (per $100,000 at 6.00% p.a.) | $500 | About $600 over 30 years | Depends on structure |
| Balance reduces over time | No | Yes | Yes if P&I |
| Interest rate | Typically higher | Typically lower | Follows the loan type |
| Tax deductibility | Full interest deductible on an investment loan | Interest portion deductible | Deductible if the funds buy an investment |
| Maximum IO period | Usually 5 years, sometimes 10 | Not applicable | Varies |
| Best for | Cash flow and keeping non-deductible home debt paying down | Building equity and lower total interest | Funding a deposit without selling |
Most investors we work with choose interest-only on the rental and direct every spare dollar at their own home loan, since only investment interest is deductible. The interest-only versus P&I calculator shows the long-run difference.
What lenders look for
Investor lending is assessed conservatively. Expect:
- Rental income shading. Lenders typically count 70% to 90% of the expected rent, using either the lease or a rental appraisal from an agent.
- Serviceability buffer. Your ability to repay is tested at the loan rate plus 3 percentage points under APRA's requirement, and many lenders also apply the buffer to your existing loans.
- Deposit and LVR. Most lenders cap investor loans at 90% LVR with LMI, or 80% without. Using home equity instead of cash is common.
- Existing debt. Every existing loan, credit card limit and car loan reduces capacity. Lender treatment of existing loans varies, and choosing the right one can add $100,000 or more to your capacity.
- Documents. Payslips or tax returns, rental statements for any properties you own, a rental appraisal for the new property, contract of sale, bank statements, and evidence of your deposit or equity.
The borrowing power calculator gives a rough guide; investor numbers need a lender-by-lender check.
Worked example: an $650,000 Craigieburn rental
A couple in Epping own their home, valued at $900,000 with a $450,000 loan (50% LVR). They want to buy a four-bedroom house in Craigieburn for $650,000 that would rent for around $560 a week.
Deposit and costs. Instead of using savings, they release equity. Their home supports lending up to 80% of $900,000, which is $720,000, leaving $270,000 of usable equity. They need 20% of $650,000 ($130,000) plus stamp duty and costs. Victorian duty on a $650,000 investment purchase is $2,870 plus 6% of $520,000, which comes to $34,070. Adding roughly $3,000 for conveyancing, inspections and registration, total upfront costs are about $167,000, drawn as a separate equity-release split against their home.
Investment loan. $520,000 (80% of the purchase price) as a standalone loan secured only on the Craigieburn property. For illustration, at 6.00% p.a. interest-only, that is $2,600 a month, or $31,200 a year.
Cash flow. Rent of $560 a week is about $29,120 a year. After the agent's fee (say 7%), council rates, insurance, water and maintenance of around $6,500, net rent is roughly $20,600. Add interest on the $167,000 equity split (about $10,020 a year at 6.00%) to the $31,200 investment loan interest, and total costs are about $47,700 against $20,600 income: a pre-tax shortfall of about $27,100 a year, or $521 a week.
Tax effect. Because the shortfall is a rental loss, it reduces taxable income. If the higher-earning partner is in the 37% bracket ($135,001 to $190,000 in 2026–27) the loss is worth roughly $10,000 in tax, plus Medicare levy savings, bringing the real cost to around $330 a week. Our negative gearing guide and the investment property cash flow calculator let you test other scenarios.
Land tax. Because the property is not their principal place of residence, land tax applies. On a site value of, say, $350,000 the 2024–33 rate is $1,350 plus 0.3% of the amount over $300,000, so about $1,500 a year. Check it with the Victorian land tax calculator.
Upfront and ongoing costs
Investors pay full duty with no first-home concession, plus:
- Application or settlement fees, typically $0 to $700, and valuation fees (often waived).
- Annual package fees where an offset is bundled, around $250 to $400.
- LMI if you borrow above 80% of the investment property's value.
- Land tax, annual, on the combined site value of all Victorian land you own other than your home. Our land tax explainer covers thresholds and the absentee surcharge.
- Capital gains tax when you sell, with a 50% discount if held more than twelve months. The CGT calculator estimates it.
Where investors go wrong
Cross-collateralising everything. One lender holding both properties as security for one loan hands the bank control over your sale proceeds and makes refinancing painful. We keep loans separate wherever possible.
Mixing purposes in one loan. Redrawing from an investment loan for a holiday contaminates deductibility; splits solve this.
Buying in the wrong name. Whether the property sits with the higher earner, the lower earner, jointly or in a trust changes the tax result for years. Talk to your accountant before the contract, not after. Our legal page on buying with a partner covers ownership options.
Assuming interest-only lasts forever. When the IO period ends, repayments jump. On $520,000 the shift from IO to P&I over the remaining 25 years lifts the payment from $2,600 to about $3,350 a month.
Missing the off-the-plan deadline. Victoria's temporary off-the-plan duty concession ends 20 October 2026, after which upfront costs on new apartments rise.
The case for using a broker
Investor lending is where lender policy differs most: rental shading, treatment of existing debt, IO terms, LVR caps and how many properties one borrower can finance all vary, and those differences decide how far your portfolio goes. Gorakh Timilsina assessed hundreds of applications as a Senior Credit Officer before founding GNT Finance, and that background shapes how we present investor files so they are approved rather than queried. We are paid by the lender at settlement, so there is no cost to you for our home-loan service in most cases, and we act under a legal Best Interests Duty. See our lender panel.
Frequently asked questions
How much deposit do I need for an investment property in Melbourne?
Most lenders want at least 10% of the purchase price plus costs, and 20% to avoid lenders mortgage insurance. On a $650,000 property that is $65,000 to $130,000 plus around $37,000 in duty and costs. Many investors fund this from equity in their existing home rather than cash savings, which our equity guide explains step by step.
Are investment loan rates higher than owner-occupier rates?
Yes, usually by 0.20 to 0.50 percentage points, and interest-only investment loans sit higher again. The gap exists because regulators require lenders to hold more capital against investor lending. A broker can narrow the gap by targeting lenders that price investors competitively, and the extra interest is tax deductible.
Can I use rental income to increase my borrowing power?
Yes. Lenders add a shaded portion of the rent, typically 70% to 90%, to your income. Some lenders also count the negative gearing tax benefit, which can lift capacity further. Because the shading and treatment differ between lenders, the same investor can be approved for very different amounts depending on where the application goes.
Should I choose interest-only or principal and interest?
Interest-only keeps repayments lower and maximises the deductible interest while you focus on paying down your own home. Principal and interest builds equity faster and attracts a lower rate. If you have no non-deductible debt left, P&I often wins. If you still have a home loan, interest-only on the investment is usually the more efficient choice.
Does land tax apply to my first investment property?
In Victoria, yes. Your home is exempt, but investment land is taxed on its combined site value each year from $50,000 upwards. A typical northern-suburbs house on a $350,000 site value pays around $1,500 a year at the 2024–33 rates. Absentee owners pay an additional 4% surcharge. Factor it into your cash flow from day one.
Talk to GNT Finance
Bring us your goals and current loan statements and we will map out what is possible, which lenders fit, and how the cash flow looks after tax. We are based in Mickleham and work across Melbourne and Victoria in English, Nepali and Hindi. Book a free consultation or call 0426 403 703.
This page is general information only and not legal, tax or financial advice. Laws change — confirm current rules with the State Revenue Office, the ATO or a licensed professional.
Written by Gorakh Timilsina
Founder, CEO & Senior Mortgage Consultant at GNT Finance. Gorakh started as a broker assistant, spent years as a senior credit officer assessing loan applications, and now helps Melbourne families get the right loan approved. English, Nepali and Hindi spoken.