If you are buying an investment unit in Perth, your loan structure matters as much as the unit you choose.
Lenders look at the unit, your income and your existing debts. Then they test whether you could still afford the loan if rates rose. Getting these pieces lined up before you make an offer puts you in a stronger position. This article is for Perth buyers, including rentvestors who plan to keep renting where they live, and who are weighing up an investment loan for a unit.
How Does an Investment Loan for a Unit Work?
An investment loan is a home loan used to buy a property you will rent out rather than live in. The lender assesses your income, your debts and the rent the unit is expected to earn.
Australian banks must test your ability to repay at a rate at least 3.0 percentage points above the loan rate. That applies to investment loans too. If a lender is unsure whether a loan is for living in or investing, it must treat it as an investment loan.
Units bring extra questions. A lender will look at the building, the unit size and the body corporate, which is the group of owners that manages shared property. Our page on investment loans for units and apartments explains how lenders view these properties.
How Much Can You Borrow for an Investment Unit?
Your investment loan amount depends on your income, your debts, your living costs and the loan product you choose. Each lender applies its own policy, so the same buyer can get different results from different lenders.
Existing debts count against you. Lenders ask about balances, rates and terms, and they apply a notional repayment to credit cards based on the card limit, not the balance. Cancelling cards you do not use can lift your borrowing power.
Rent counts as income, but not in full. APRA expects lenders to count no more than 80 per cent of expected rent, to allow for vacancies. Lenders also tend to rely less on a rental appraisal than on actual rent received. See rental income assessment for investment loans for the detail, and use our borrowing capacity tool for a starting estimate.
Interest Only or Principal and Interest: Which Suits an Investment Unit?
Interest only means you pay just the interest for a set period, so the loan balance does not fall. Principal and interest means each repayment also reduces the balance. Interest only lowers your repayments for a time, but you owe the full amount at the end of that period.
It does not increase how much you can borrow. Lenders assess an interest-only loan on principal and interest repayments over the remaining term after the interest-only period. A 30-year loan with five years interest only is tested over 25 years.
Consider a buyer with a $500,000 loan at the illustrative rate of 6.75% p.a. Interest only costs about $2,813 a month ($500,000 x 6.75% / 12). On a 30-year principal and interest loan at the same rate, repayments are about $3,243 a month. That is roughly $430 a month less on interest only.
The trade-off shows up when the interest-only period ends. After five years of interest only you still owe $500,000. On the 30-year principal and interest loan you would owe about $469,000. If principal and interest then applies over the remaining 25 years, your repayment at 6.75% rises to about $3,455 a month, about $212 a month more than the 30-year loan. You will also have paid more interest overall. This example is illustrative only, and your actual rate will vary by lender and deposit size.
Our interest-only investment loans page covers the structure in more detail, and our mortgage repayments calculator lets you test your own numbers.
Ready to get started?
Book a chat with a Finance & Mortgage Brokers at Rentvesting Mortgage Broker today.
What Deposit Do You Need and When Does LMI Apply?
Lenders mortgage insurance (LMI) is generally required when your loan is more than 80 per cent of the property value. The 80 per cent line is not a legal borrowing limit, it is where lenders and insurers usually step in.
Borrowing above 80 per cent needs approval from both the lender and the insurer. The premium is paid by you and is based on the loan amount and the loan to value ratio (LVR). The cost, and whether it can be added to the loan, depends on the lender and insurer.
The trade-off is clear. A smaller deposit lets you buy sooner, but you pay LMI and carry a larger loan with higher repayments. Our guides to lenders mortgage insurance for investors and low deposit investment loans cover the options.
How Are Investment Unit Loans Treated at Tax Time?
Interest on a loan used to buy a rental property is generally deductible while the property is rented or available for rent. Only the interest part of a repayment is deductible. The principal part is not.
Other holding costs such as council rates, insurance, property management fees, repairs and depreciation can also be deductible for the period the unit is rented or genuinely available for rent. Body corporate fees are a regular cost of owning a unit, so ask your accountant how they apply.
Negative gearing rules have changed. Losses on established residential properties bought after 7:30pm AEST on 12 May 2026 can only be offset against other residential property income from the 2027-28 income year. Eligible new builds keep the current treatment. Properties held at that time are grandfathered. That makes the choice between an established unit and a new one a tax question as well as a loan question, so speak to your accountant before you buy. Our negative gearing page has more.
Should You Use a Broker for an Investment Unit Loan?
A broker can compare investment loan options from the lenders on their panel and match your situation to a lender's policy. This matters for units because lenders differ on building size, unit size and how they treat rent.
The trade-off is that you need to share full details of your finances, and a broker's recommendation should still be checked against your own goals. We work with rentvestors, so we look at how the loan fits your rent, your investment and your long-term plan together.
As an example, consider a Perth renter who wants to keep living close to work and buy a unit as an investment. A broker could structure the loan so that interest-only and principal-and-interest options are compared at the same rate, check how a lender will count the expected rent, and flag whether LMI applies. The buyer then sees the monthly cost, the borrowing limit and the tax questions to raise with an accountant before making an offer. That clarity lets them bid with confidence.
Call one of our team or book an appointment at a time that works for you on our booking page, and we will map out your investment unit loan before you make an offer.
Frequently Asked Questions
How much of the rent do lenders count on an investment unit?
APRA expects lenders to count no more than 80 per cent of expected rent. Lenders also tend to rely less on a rental appraisal than on actual rent received.
Does interest only let me borrow more?
No. Lenders assess interest-only loans on principal and interest repayments over the remaining term after the interest-only period. That usually means a lower maximum loan size than a standard loan.
When is LMI required on an investment loan?
LMI is generally required when the loan is more than 80 per cent of the property value. It needs approval from both the lender and the insurer, and you pay the premium.
Is all the interest on an investment loan tax deductible?
Interest is generally deductible to the extent the property is rented or available for rent. Only the interest part of a repayment counts, and you should confirm your position with your accountant.
