Buying an investment property is one of the biggest financial decisions many Australians make, and the loan you choose shapes your cash flow for years. If you're starting to look at loans for real estate investors, it helps to understand how they work before you speak to a lender or start inspecting properties.

You're also in good company. According to a May 2026 Reserve Bank of Australia (RBA) Bulletin, there were about 2.3 million individual housing investors in Australia in 2022/23, and around 70 per cent of them owned a single investment property.

In this guide, we'll explain what investment loans are, the common loan structures, how lenders assess your application, the real costs and risks of borrowing for investment property, and where a mortgage broker fits in.

What are loans for real estate investors?

An investment loan is a home loan used to buy, or sometimes improve, a residential property you plan to rent out rather than live in. The property itself is usually the security for the loan, and rent from tenants becomes part of the income you use to cover the repayments.

From the outside, investment loans can look a lot like owner-occupier home loans. The difference is in how lenders treat them. Lenders know the loan is for an investment, so their pricing, features and assessment policies can differ from a loan for the home you live in. When you compare options, make sure you're looking at products and rates for investment lending, not owner-occupier loans.

Loans to buy residential investment property are generally regulated under the National Credit Act, which means the usual consumer protections apply. That includes responsible lending checks and, if you use a mortgage broker, the broker's legal duty to put your interests first.

Common types of real estate investment financing

Most real estate investment financing is built from a few familiar pieces. The right mix depends on your income, your goals and how much flexibility you want.

Principal and interest

Your repayments cover the interest and gradually reduce the amount you owe. Repayments are higher than interest-only at the start, but you build equity from day one.

Interest-only

For a set period, you pay only the interest, so the loan balance doesn't go down. Interest-only is common with investors. The same RBA Bulletin found that around 40 per cent of new investor lending has been interest-only since 2018. The trade-offs are important: you don't reduce the debt during that period, the interest rate may be higher than on a principal and interest loan, and repayments rise when the interest-only period ends.

Fixed, variable or split

A fixed rate gives you predictable repayments for a set period but can limit extra repayments and may involve break costs if you exit early. A variable rate is usually more flexible but can rise. A split loan fixes part of the balance and keeps the rest variable.

Offset and redraw

Some investment loans offer an offset account or redraw facility. These can help you manage interest and cash flow, but how you use them can have tax implications for an investment loan, so it's worth getting advice from your accountant before you mix personal and investment funds.

Using equity in your home

If you already own a home, some lenders may let you borrow against the equity in it to fund your deposit and costs. This can help you invest sooner, but it also puts your home on the line. As Moneysmart points out, if you can't keep up with repayments, you could lose your home.

How real estate investment lenders assess your application

Real estate investment lenders look at the whole picture, not just the property. Expect them to consider:

Your income and expenses: your salary or business income, the expected rent and your living costs.
Your existing debts: other home loans, car loans, personal loans, credit card limits and buy now pay later accounts.
A buffer for rate rises: under APRA's guidance, banks assess whether you could still afford repayments if interest rates were 3 percentage points higher than the loan rate. APRA confirmed in May 2026 that this buffer remains at 3 percentage points.
Debt-to-income (DTI): since February 2026, APRA has limited banks and other authorised deposit-taking institutions so that no more than 20 per cent of their new investor lending (and, separately, owner-occupier lending) can have a debt-to-income ratio of six or more. If you already carry a lot of debt, this can affect how lenders view another loan.
Your deposit and LVR: the loan-to-value ratio (LVR) is the loan amount as a percentage of the property's value. If you borrow more than 80 per cent, lenders mortgage insurance (LMI) usually applies. LMI protects the lender, not you.
Your credit history and the type and location of the property.

The full cost of borrowing for investment property

When you're borrowing for investment property, the repayment is only one part of the picture. Moneysmart lists the main costs to plan for:

Buying costs: stamp duty, conveyancing and legal fees, searches, and building and pest reports.
Ongoing costs: council and water rates, building and landlord insurance, body corporate or strata fees, land tax, property management fees and repairs.
Loan costs: interest, establishment fees, ongoing fees and LMI if your deposit is under 20 per cent.

Moneysmart's own worked example shows an investment property where the rent doesn't cover the loan repayment and expenses, leaving the owners with a monthly shortfall of more than $1,400 to cover from their salary. Running your own numbers before you buy, including a period with no tenant, can save a lot of stress later.

Risks to weigh up before you borrow

Borrowing to invest can increase your returns when property values rise, but it also magnifies losses when they fall. Before you commit, think about:

Vacancy: there may be weeks or months without rent, and the repayments don't stop.
Interest rate rises: Moneysmart suggests checking whether you could still afford repayments if rates rose by 2 or 4 percentage points.
Falling values: if the property's value drops, you could owe more than it's worth.
The end of an interest-only period: repayments can jump significantly when you start paying off the principal.
Concentration: having most of your wealth in one property, or one market, increases your exposure if that market weakens.

A note on tax: the ATO says interest on a loan used to buy a rental property can generally be claimed while the property is rented or genuinely available for rent, but interest on any private portion of a loan can't. Moneysmart also notes that the 2026 Federal Budget announced changes to negative gearing and capital gains tax. Tax rules are complex and can change, so speak with a registered tax agent or accountant about your situation. This article is general information, not tax or investment advice.

How a mortgage broker can help

A mortgage broker can compare loans for real estate investors from a panel of lenders, explain how different lenders treat your income and existing debts, and help you structure the loan so it suits your plans. At TNL Finance, we can compare options from more than 40 lenders, including banks and specialist lenders, and handle the paperwork through to settlement.

For residential investment property loans, brokers have a legal duty to put your interests first when they recommend a loan. A broker can't promise approval or a particular rate, and the final lending decision always rests with the lender. Decisions about which property to buy, or whether property suits your investment strategy, are for you and your licensed financial adviser.

Frequently asked questions

Do I need a 20 per cent deposit for an investment property?

Not always. A 20 per cent deposit usually means you can avoid LMI, but some lenders may accept a smaller deposit with LMI. Requirements vary between lenders and depend on your situation.

Can I use the equity in my home to invest?

Often, yes, if you have enough equity and can afford the repayments. Remember that your home becomes security, so it's at risk if you can't keep up with repayments.

Is an interest-only loan better for investors?

It depends on your goals and cash flow. Interest-only can lower repayments for a period, but you don't reduce the debt, it may cost more overall and repayments rise later.

Are Loans for Real Estate Investors Right for You?

Loans for real estate investors can help you build a property portfolio, but they come with real costs and risks: higher debt, possible rent shortfalls, interest rate changes and tax rules that can shift over time. The right loan is the one you can comfortably afford in good times and tough times, structured to suit your goals.

If you'd like a hand working out your options, here's how we can help.

Planning Your Next Investment Property? Talk to TNL Finance in Melbourne

If you're weighing up loans for real estate investors, you don't have to compare lenders on your own. TNL Finance is a Melbourne mortgage and finance broker based in Sunshine, and we help investors compare options from 40+ banks and specialist lenders. With 5+ years of experience in the Australian banking and finance industry, we'll explain how different lenders look at your income, existing loans and expected rent, help you prepare a clear application and support you through to settlement.

90% Submission to Settlement Rate: Around 90% of loan applications submitted to lenders successfully proceed through to settlement.
70% Lead to Settlement Rate: Around 70% of initial client leads ultimately proceed through to settlement.

Note: Settlement statistics are based on internal TNL Finance historical client data. Individual outcomes depend on property valuation, current financial circumstances, and specific lender credit policies.

The final lending decision rests with the lender, and you're never obliged to proceed. Ready to talk through your plans? Get in touch with TNL Finance for a relaxed, complimentary chat.

Loans for Real Estate Investors: How Investment Property Finance Works in Australia