Top tips to secure an investment loan for an apartment

How lenders assess apartment investment loans differently

Lenders apply higher risk weightings to investment loans than owner-occupied borrowing, and apartments attract additional scrutiny compared to houses. You'll need to service the loan at an interest rate at least 3.0 percentage points above the actual product rate, and if your total debt-to-income ratio sits at six times your gross income or higher, your application falls into a restricted lending category where lenders can only approve a limited number of applications each quarter.

Consider a clinical pharmacist earning $115,000 annually who wants to buy a two-bedroom apartment as an investment. If they already have a $450,000 mortgage on their home, their total debt-to-income ratio is 3.9 before adding the investment loan. A $500,000 investment loan would push that ratio to 8.3, placing the application in the restricted category. Some lenders will still proceed, but others will decline regardless of income stability or deposit size.

Apartments also trigger lender-specific property policies. Most lenders cap exposure to apartments above a certain floor level, apply postcode restrictions in areas with high apartment supply, or decline finance on buildings with unresolved defects or low owner-occupier ratios. Your deposit size, rental income and existing borrowing capacity all matter, but property type and location determine whether the loan is even available.

Deposit requirements and LMI for investment apartments

Lenders Mortgage Insurance is generally required by lenders on residential loans where the loan-to-value ratio exceeds 80 per cent. For investment loans, most lenders will lend up to 90 per cent of the property value if you're willing to pay LMI, though some cap investment lending at 80 per cent regardless of insurance. The premium is calculated on the loan amount and LVR, and state and territory stamp duty may be payable on the LMI premium in some jurisdictions.

If you're buying an apartment at an 85 per cent LVR, the LMI premium might add $10,000 to $15,000 to your upfront costs depending on the loan amount. That premium can be capitalised into the loan, but doing so increases your LVR slightly and your ongoing repayments. Pharmacists may have access to LMI waivers on owner-occupied lending, but those concessions rarely extend to investment loans. A larger deposit avoids the premium entirely and improves your interest rate, but it also ties up capital that could be deployed elsewhere.

Interest-only versus principal and interest repayments

Interest-only loans generally attract higher risk weights than owner-occupied principal-and-interest loans at the same LVR, which flows through to slightly higher interest rates. Lenders typically offer interest-only periods of one to five years on investment loans, after which the loan reverts to principal and interest unless you negotiate an extension.

An interest-only structure reduces your monthly outgoings during the interest-only period, which can be useful if rental income doesn't fully cover the loan repayment or if you're managing cash flow across multiple properties. In our experience, clinical pharmacists with variable income from locum shifts or overtime often prefer interest-only terms to maintain flexibility during quieter periods. The downside is that you're not reducing the loan balance, so the principal and interest repayments after reversion are higher than they would have been on a principal and interest loan from the start.

A long-term interest-only residential loan is classified as non-standard where the LVR is greater than 80 per cent and the contractual interest-only period is greater than five years or is not specified. That classification can limit your lender options or push your application into a higher rate tier.

Variable or fixed rates for investment property finance

Variable rates on investment loans currently sit above variable rates for owner-occupiers, and fixed rates for investors are similarly priced at a premium. A variable rate gives you full access to offset accounts and unlimited additional repayments, which matters if you want to park surplus cash against the loan to reduce interest. Fixed rates lock in your repayment for the fixed period, but they come with restrictions on additional repayments and often prohibit offset functionality.

Some lenders allow you to split the loan between variable and fixed portions. That structure can give you rate certainty on part of the balance while preserving flexibility on the rest. If you're planning to use rental income to pay down the loan or if you expect a bonus or equity release in the next few years, a fully fixed loan limits your options. If rates rise and you're on a variable loan, your repayments increase, but you're not locked in if you want to refinance your investment loan to access a lower rate elsewhere.

How rental income affects your borrowing capacity

Lenders will include a portion of the expected rental income when assessing your serviceability, but they don't credit the full amount. Most lenders apply a shading factor of 70 to 80 per cent to account for vacancy periods, maintenance costs and rental volatility. If the apartment is expected to generate $550 per week in rent, the lender will assess your income as though you're receiving $385 to $440 per week from that property.

Rental estimates are typically supported by a letter from a property manager or a rental appraisal from a licensed agent. If the property is in an area with high vacancy rates or oversupply, some lenders will apply a more conservative shading factor or decline the application outright. Apartment buildings with a high proportion of investment units can also trigger lender concerns about rental competition and capital growth.

Your existing salary as a clinical pharmacist is the primary income source lenders assess. Rental income increases your total servicing position, but it doesn't replace the need for stable employment income, particularly when the serviceability buffer and debt-to-income limits are applied.

Structuring the loan to support portfolio growth

If you're buying your first investment property with the intention of acquiring more, loan structure matters from the outset. Setting up the investment loan as a standalone facility, separate from your owner-occupied mortgage, keeps your finances clear for tax purposes and makes it easier to refinance or release equity later without disturbing your home loan.

Some pharmacists use equity in their home to fund the deposit on an investment apartment. That's a valid approach, but the borrowing used to fund the deposit needs to be structured correctly if you want the interest to remain deductible. Interest on borrowings used to acquire or hold residential rental property is deductible against assessable income to the extent the property is rented or held to produce assessable income. If you refinance your home loan to pull out equity and the funds are used for the investment deposit, the interest on that portion is deductible. If the funds are mixed with personal borrowing or used for non-investment purposes, deductibility becomes more complex.

Loan features like offset accounts and redraw facilities are useful, but they have different tax implications. An offset account linked to your investment loan reduces the interest you pay without reducing the deductible loan balance. A redraw facility allows you to withdraw additional repayments, but using those funds for personal expenses can blur the line between deductible and non-deductible interest. We regularly see this cause issues at tax time, particularly where clients have made lump sum repayments and then redrawn portions for unrelated purposes.

Tax treatment for apartments purchased as investments

Losses from residential investment properties held at 7:30pm AEST on 12 May 2026, including properties under contract awaiting settlement at that time, continue to be fully deductible against other income until the property is sold, and losses from new builds acquired after 12 May 2026 can also continue to be deducted against all income. If you're buying an established apartment after that date, losses are deductible only against other income from residential properties from the 2027-28 income year, and excess losses can be carried forward.

Eligible new builds include dwellings constructed on previously vacant land and dwellings replacing existing properties where the number of dwellings increases. Most apartments in new buildings qualify as eligible new builds, but a new build occupied for more than 12 months before sale to a subsequent investor loses access to negative gearing for that subsequent purchaser. If you're buying an apartment in a building completed two years ago, you need to confirm whether the unit was previously owner-occupied or tenanted to understand your tax position.

Ongoing expenses like body corporate fees, council rates, insurance, property management, water charges and depreciation remain deductible under existing ATO rules for the period the property is rented or genuinely available for rent. Interest on your investment loan is also deductible, subject to the negative gearing rules above.

Capital gains tax changes from July 2027

From 1 July 2027, the 50 per cent CGT discount for individuals on affected assets is replaced by cost base indexation using CPI and a 30 per cent minimum tax rate on real capital gains accruing from that date. For assets owned before 1 July 2027 and sold after that date, gains are taxed under the current rules for the portion accruing before 1 July 2027 and under the new rules for the portion accruing after that date.

If you buy an apartment now and sell it in six years, you'll calculate the gain in two parts. The portion of the gain that accrued before 1 July 2027 is taxed under the existing 50 per cent discount method. The portion accruing after that date is indexed for inflation, and the indexed gain is taxed at a minimum rate of 30 per cent if your marginal rate on that portion is lower. For investors in eligible new build residential properties, both the existing 50 per cent CGT discount and the new indexation and 30 per cent minimum tax arrangements are available as a choice at the time of disposal.

These changes don't affect your borrowing capacity or loan structure, but they do change the after-tax return on investment property, particularly for investors in lower tax brackets or those planning to hold property long-term.

Lender policies on apartment buildings and location

Lenders maintain internal postcode and building registers that can exclude certain apartments from finance, regardless of your financial position. High-rise buildings above a certain floor, buildings with cladding issues, apartments in areas with high investor concentration, and units in buildings where the developer still owns unsold stock can all trigger declines.

If you're buying an apartment in a building with fewer than six units, some lenders classify it as a house for serviceability purposes, which can improve your borrowing capacity. If the building has more than 50 per cent non-residential use, such as commercial tenancies or short-term accommodation, most lenders will decline or apply significant rate loadings. Buildings with active defect claims, incomplete remediation work, or unresolved fire safety notices are generally unfinanceable until the issues are resolved.

We regularly see clinical pharmacists find an apartment that meets their investment criteria, only to discover that their preferred lender won't finance that specific building. Running the property past a broker before signing a contract avoids wasted time and conveyancing costs. Some lenders will provide an indicative property assessment before formal application, which can confirm whether the building is acceptable.

Call one of our team or book an appointment at a time that works for you. We'll review your income, deposit and property plans, confirm which lenders will finance the apartment you're considering, and structure the loan to align with your tax position and long-term strategy.

Frequently Asked Questions