Beginner's Guide to Buying a Duplex and Funding It

A duplex loan works well when you plan it around how you will use each side of the property. That plan shapes the loan type, the repayments and how a lender views your income.

For consultant pharmacists, there is often another layer. Your income may come from several contracts, an ABN or a mix of employment and consulting work. This guide covers what to settle before you apply for a home loan on a duplex.

How Do Lenders Assess a Duplex Purchase?

Lenders assess a duplex on your income, your debts, your deposit and the property itself. Each lender has its own policy, so the same duplex can be treated differently depending on who you apply with.

A duplex may sit on a single title or on two separate titles. This can affect how a lender views the property as security, so ask your conveyancer early and tell your broker before you sign a contract.

If you plan to rent out one side, lenders may count only part of the expected rent when they work out what you can borrow. How much they count varies by lender. You can see how this plays out on our borrowing capacity page.

Owner Occupied or Investment: Which Loan Applies to Your Duplex?

If you live in one side and rent out the other, the loan type depends on the lender's policy and on how the property is used. Some lenders will look at it as an owner occupied home loan, and others will apply investment settings. Confirm this before you make an offer.

The difference matters because the interest rate, the repayment options and the features on offer can differ between the two. If both sides will be rented out, you are buying an investment property. Our guide to buying your first investment property covers that path.

Rent from a duplex is taxable income, and deductions depend on your circumstances. Speak to your accountant before you commit, because tax outcomes vary from person to person.

Contract Income and Pre-Approval: A Worked Scenario

A consultant pharmacist who invoices through an ABN can still get a duplex loan, but the lender will want to see how stable that income is. Pre-approval gives a conditional indication of how much you may be able to borrow, which helps you set a price range before you bid. It is not a guarantee of final approval, and the lender will still assess the specific duplex.

As an example, consider a pharmacist who splits their week between aged care medication reviews and a part-time employed role. They want a duplex to live in one side and rent out the other. They are worried that their consulting income will be treated as irregular.

Before looking at properties, they ask a broker to assess several lenders. Some lenders weigh contract income differently from others, so the broker picks those whose policies suit the way this pharmacist is paid. The broker also reviews the income records the lenders will ask for. These are usually tax returns, business activity statements and recent invoices.

The outcome is a pre-approval with an indicative borrowing range. The pharmacist can search with a price range in mind. The pre-approval is subject to the property valuation, final checks and no change in their circumstances, and it expires. The lender will still assess the duplex itself before final approval. If your work is mostly on contract, our page on self employed loans for pharmacists explains how lenders look at this type of income.

Duplex Repayments: Interest Only vs Principal and Interest

Interest only repayments are lower at the start, but they do not reduce your loan amount. Principal and interest repayments cost more each month but pay the loan down.

Here is an illustrative example at 6.75% p.a. on a loan of $800,000 over 30 years. This is an example rate only and not a current offer.

• Principal and interest: about $5,189 a month.
• Interest only: about $4,500 a month.
• Interest only for 5 years, then principal and interest over the remaining 25 years: about $5,527 a month.

The interest only period saves roughly $689 a month at first. After it ends, repayments rise by about $338 a month compared with starting on principal and interest, because the same loan is repaid over a shorter time. You also owe the full $800,000 at the end of the interest only period.

Interest only loans often carry a higher rate than principal and interest loans, and they cost more in total interest over the life of the loan. When the interest only period ends, the loan reverts to principal and interest over the remaining term, so repayments rise and may be hard to afford. Whether interest only suits you depends on the lender's policy, the loan purpose and your circumstances. Weigh the trade-off carefully, and read about interest only loans for pharmacists before you decide. Use a repayment calculator to test your own numbers, because lenders and loan sizes differ.

Offset Account and Split Rate Options on a Duplex Loan

An offset account reduces the interest you pay by offsetting your savings against the loan balance, while keeping the money accessible. A split loan lets you hold part of the loan on a fixed rate and part on a variable rate.

These features can suit a duplex buyer who earns irregular consulting income. Savings held in the offset can help to cover quiet months, and it can reduce interest on the loan. The trade-off is that loans with an offset may carry higher fees or a higher rate, depending on the lender, so check the total cost.

A fixed portion gives you certainty on part of your repayments. It can also limit extra repayments and may involve break costs if you exit early. A variable portion usually allows more flexibility, but repayments can rise if rates go up.

What to Ask Before You Make an Offer on a Duplex

Before making an offer, confirm the title type, the loan type your lender will apply and how they will treat your rental income. Also check the repayments with a rate buffer in mind.

It is also worth asking how a lender treats a property if you later move out of one side. Policies on this differ, and it is wiser to know before you settle than after.

If you are comparing lenders, ask for a home loan rates comparison that includes fees as well as the headline rate. Rates change regularly and depend on your deposit size, your loan to value ratio and the lender, so the right option for one buyer may not suit another.

If you want to talk through your duplex plans, our team works with pharmacists in all areas of practice, including consultant pharmacists. Call one of our team or book an appointment at a time that works for you, and we will help you compare loan options before you make an offer.

Frequently Asked Questions