Everything You Need to Know About Investment Loans

Investment loans let you borrow to buy a rental property instead of waiting years to save the full purchase amount.

You work with voltage and circuits every day, which means you already understand leverage. An investment loan works the same way, letting you control an asset worth several hundred thousand dollars while only putting down a fraction of that amount. The property generates rental income, you claim the interest and costs, and over time you build equity that can fund the next purchase or clear your owner-occupied mortgage faster.

What matters right now is whether buying an investment property makes sense for your situation, which loan structure fits your cash flow, and how the tax changes coming in from July next year affect the numbers. The rest is detail.

How Investment Loan Deposits Work for Tradies

Most lenders want 10 to 20 per cent deposit for an investment loan, though some will go lower if you have equity in your home or meet certain lending criteria. If you put down less than 20 per cent you pay Lenders Mortgage Insurance, which can add several thousand dollars to the loan amount but lets you get into the market sooner.

Consider an electrician who owns a home with $150,000 in equity. Rather than saving cash for a rental property deposit, they can refinance or take out a separate loan secured against their home equity and use that as the deposit. The equity release lets them keep their cash flow intact while still accessing the property market. That approach works if your owner-occupied property has enough value and your income can service both loans, which most lenders assess at current rates plus a 3 percentage point buffer.

Interest Only or Principal and Interest

Interest-only repayments reduce your monthly cost and maximise the tax deduction because you are not paying down the loan balance. Principal and interest repayments cost more each month but reduce the loan amount over time and eventually clear the debt.

Most investors choose interest-only for the first few years to keep cash flow manageable and maximise deductions, then switch to principal and interest later. The approach you pick depends on whether you need the cash flow now or prefer to pay down debt faster. Lenders typically offer interest-only terms of up to five years on investment loans, after which the loan automatically converts to principal and interest unless you apply to extend.

Variable Rate or Fixed Rate for Investment Property

Variable rates move with the market, which means your repayments can go up or down. Fixed rates lock in for a set period, usually one to five years, giving you certainty but removing flexibility if you want to make extra repayments or refinance early.

In our experience, most electricians with investment loans prefer variable rates because the property is not their home and they want the option to pay down the loan or refinance without penalty. Some split the loan, fixing part to protect against rate rises and leaving part variable for flexibility. That works if you value both certainty and control, but it adds complexity and you need to manage two loan accounts.

Tax Changes Coming in July Next Year

From 1 July 2027, negative gearing rules change. If you buy an established property after 7:30pm on 12 May 2026, you cannot offset rental losses against your wage income. Those losses can only offset other rental income or be carried forward to offset future rental income or capital gains from residential property.

If you buy a newly built property that increases the dwelling count, you can still negatively gear against your wage income under the old rules. The government wants to push investors toward new builds to increase housing supply, so the tax treatment is more generous. The same property bought as an established dwelling a few years later loses that advantage for the next buyer unless it qualifies as a new build again.

Capital gains tax also changes from 1 July 2027. The 50 per cent discount is replaced with cost base indexation and a minimum 30 per cent tax rate on real gains, though new builds get to choose between the old discount and the new indexation method. Gains you make before 1 July 2027 stay under the current rules, so there is a split treatment for properties you already own.

Rental Income and Borrowing Capacity

Lenders include rental income when calculating how much you can borrow, but they only count 80 per cent of it to account for vacancy periods and maintenance costs. If a property rents for $600 per week, the lender treats it as $480 per week when assessing your serviceability.

That calculation matters because it affects whether you can afford to buy a second or third property. Each new investment loan reduces your borrowing capacity for the next one unless the rental income is strong enough to cover most or all of the holding costs. Most electricians we work with can service one or two investment loans comfortably, but beyond that you need significant rental income or a high wage to keep the numbers stacking up.

What Lenders Look at Beyond Your Deposit

Lenders assess your application on income stability, existing debts, credit history, and the property itself. If you are self-employed, they want recent tax returns or financials. If you have a car loan or other debts, those repayments reduce how much you can borrow.

The property also gets assessed. Lenders prefer properties in metro or strong regional areas with consistent rental demand. They avoid properties on large acreage, in very remote locations, or with unusual features that make them hard to sell. Body corporate fees on units get added to your expenses, which reduces your borrowing capacity slightly but usually not enough to matter unless the fees are excessive.

How to Structure Multiple Investment Loans

If you plan to buy more than one investment property, keep each loan separate rather than bundling them together. Separate loans give you more control when you want to sell one property or refinance part of your portfolio without affecting the rest.

The same logic applies to mixing investment and owner-occupied debt. Do not cross-collateralise unless you have a specific reason, because it locks your properties together and makes it harder to sell or refinance one without dealing with the others. Most brokers recommend keeping your loans as independent as possible so you retain flexibility as your situation changes. If you are already looking at expanding your property portfolio, structuring each loan correctly from the start saves a lot of hassle later.

What You Can Claim and What You Cannot

Interest on the investment loan is deductible, along with property management fees, council rates, insurance, repairs, and depreciation. Stamp duty is not deductible upfront but gets included in your cost base for capital gains tax when you sell.

Capital improvements like renovations or extensions are also not deductible as an expense, but they increase your cost base and reduce your capital gain. Repairs are deductible in the year you do them, but improvements are not. The line between the two is not always obvious, so if you are doing any work on the property, get advice before claiming it.

You cannot claim interest on borrowings used for private purposes, even if the loan is secured against your investment property. If you refinance an investment loan and pull out equity to buy a car, the interest on that portion is not deductible. Keep the purpose of each loan clean and documented so you do not lose deductions.

When to Refinance an Investment Loan

Refinancing makes sense if you can get a lower rate, access better loan features, or release equity to fund the next purchase. Most lenders offer investment loan refinancing with minimal fuss if your income and property values support it.

If your property has increased in value since you bought it, refinancing lets you access that equity without selling. You can use the released equity as a deposit for another investment property or to pay down higher-interest debt like credit cards or car loans. Just make sure the interest on the new borrowing is deductible for the purpose you are using it, otherwise you are paying non-deductible interest and losing the tax benefit.

Applying for an Investment Loan as an Electrician

Lenders treat electricians the same as any other wage earner if you are on payroll. If you run your own business, they want to see at least two years of tax returns or financial statements showing consistent income. Some lenders accept low-doc applications if you have been in business for a shorter period, but the rates are usually higher and the deposit requirements stricter.

Your application needs proof of income, recent payslips or tax returns, bank statements, and details of any existing debts. The lender also needs a valuation of the property you are buying, which they arrange once your application is approved in principle. The whole process usually takes two to four weeks depending on how quickly you provide documents and how busy the lender is.

Call one of our team or book an appointment at a time that works for you. We will go through your numbers, look at what you can borrow, and work out whether an investment loan fits your situation or whether you are better off waiting.

Frequently Asked Questions