Investment loan approval depends on rental income, debt-to-income ratio, and the lender's serviceability calculation. Lenders assess whether the property generates enough rental income to support the borrowing, and whether your total debt remains within the regulator's limits.
Brunswick's mix of Victorian terraces, post-war units and newer townhouses attracts a range of investor profiles. Properties close to Sydney Road or within walking distance of the Upfield line tend to show stable occupancy, which matters when a lender calculates rental yield. The suburb's proximity to the CBD and university precincts supports consistent demand, though vacancy periods still occur.
How Lenders Calculate Serviceability for Investor Borrowing
Lenders apply a three percentage point buffer above the product rate when testing your ability to repay. If the variable rate sits at 6.2 per cent, serviceability is calculated at 9.2 per cent. Rental income is included at 80 per cent of the gross figure to account for vacancy and maintenance.
Consider a buyer looking at a two-bedroom unit near Anstey Station. The property rents for $550 per week. The lender includes $22,880 per year as rental income in the assessment, not the full $28,600. The buyer earns $95,000 per year and has $1,200 per month in living expenses. The lender adds the buffered loan repayment to those expenses, then compares the total to net income. If the ratio exceeds the lender's threshold, the application fails serviceability.
Debt-to-Income Limits Under APRA Prudential Settings
The debt-to-income cap introduced in February 2026 restricts how much a lender can approve relative to your gross income. A bank may lend up to 20 per cent of its new investor loans at a DTI of six times or greater. Beyond that limit, the lender either declines the loan or offers a lower amount.
If your total borrowing, including the new investment loan, reaches seven times your gross income, the application moves into the restricted pool. Lenders with capacity remaining in that 20 per cent allocation may proceed. Others will not. The cap applies separately to investor and owner-occupier portfolios, so a strong owner-occupier pipeline at one lender does not free up investor capacity.
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The Role of Loan-to-Value Ratio and Lenders Mortgage Insurance
Most lenders cap investment loans at 90 per cent LVR. Borrowing above 80 per cent triggers Lenders Mortgage Insurance, which protects the lender if you default. LMI premiums vary by lender, loan amount and deposit size. A premium on a loan at 90 per cent LVR can add several thousand dollars to upfront costs.
A lower LVR improves your rate and widens your choice of lender. Borrowing at 75 per cent rather than 85 per cent typically unlocks better pricing and may increase the loan amount a lender is prepared to approve, because serviceability improves when the loan amount falls.
Interest Only Versus Principal and Interest Repayments
Interest only repayments reduce the monthly cost and can improve cash flow during the holding period. Most lenders offer interest only terms of up to five years on investment loans, after which the loan reverts to principal and interest.
The regulator does not restrict interest only lending for investors in the same way it did in previous cycles, but lenders still assess serviceability on a principal and interest basis even when you elect an interest only period. If the loan does not pass serviceability at principal and interest repayments, the application will not proceed regardless of the repayment type you prefer.
Rental Income and How Vacancy Affects Approval
Rental income must be supported by a current lease or a rental appraisal from a licensed property manager. Lenders apply an 80 per cent shading factor to account for periods when the property sits vacant or requires repair. A property appraised at $600 per week contributes $24,960 per year to your serviceability, not $31,200.
Properties in Brunswick with period features and limited parking may take longer to lease between tenants. A lender reviewing a rental appraisal for a single-fronted terrace will compare the figure to similar properties in the suburb. If the appraisal appears optimistic, the lender may request a second opinion or reduce the assessed income further.
Tax Treatment Changes from July 2027
The Treasury Laws Amendment (Tax Reform No. 1) Act 2026 introduces quarantining of rental losses for residential properties acquired on or after 7:30pm AEST on 12 May 2026. From 1 July 2027, net rental losses on affected properties can only be offset against other residential rental income or carried forward. Losses cannot be offset against salary or wages.
Properties held at 7:30pm AEST on 12 May 2026 retain access to negative gearing under existing rules until sold. Eligible new builds, defined as dwellings constructed on previously vacant land or developments that increase dwelling numbers, remain exempt. A knock-down rebuild that does not increase the number of dwellings is not eligible.
This change affects cash flow during the holding period. An investor who previously reduced taxable income through negative gearing will carry those losses forward instead. The benefit is deferred, not removed, but the timing matters for borrowers with limited surplus income.
Structuring Your Application for a Faster Decision
Lenders assess your most recent tax return, payslips, and bank statements. Irregular deposits, frequent overdrafts or unexplained transfers can delay the assessment. Six months of consistent account conduct improves the outcome.
If you plan to use equity from an existing property to fund the deposit, the lender will require a valuation. A valuation below the expected figure reduces available equity and may require you to adjust the purchase price or provide additional cash. Ordering a valuation before you make an offer removes that risk, though most buyers only instruct a valuation once the contract is signed.
Variable Rate or Fixed Rate for Investment Property Finance
Variable rate loans offer flexibility and typically allow additional repayments and redraw without penalty. Fixed rate loans lock in the rate for a set period, usually between one and five years, and may limit additional repayments or charge break costs if you exit early.
Most investors prefer variable rates because investment property finance is often refinanced or restructured as equity builds. A fixed rate may suit buyers who want certainty during a period of rising rates, but the rate is generally higher than the variable equivalent at the time of settlement. Consider your broader property investment strategy before locking in a rate.
Choosing the Right Lender for Your Situation
Not all lenders assess rental income or existing liabilities in the same way. One lender may include 100 per cent of bonus income if it has been received for two years. Another may cap bonus income at 50 per cent. The same variation applies to rental income shading, expense benchmarks and DTI interpretation.
Working with a broker who can access investment loan options from banks and lenders across Australia ensures your application is matched to the lender most likely to approve it at the loan amount you need. A declined application affects your credit file and reduces your options with other lenders, so placement matters.
Call one of our team or book an appointment at a time that works for you. We work with property investors across Brunswick and structure applications around the lender policies that align with your income, deposit and rental appraisal.
Frequently Asked Questions
What is the debt-to-income cap for investment loans?
The DTI cap introduced in February 2026 allows lenders to approve up to 20 per cent of new investor loans at a DTI of six times or greater. If your total borrowing exceeds six times your gross income, the application moves into a restricted pool and approval depends on the lender's remaining capacity.
How do lenders treat rental income in serviceability calculations?
Lenders include rental income at 80 per cent of the gross figure to account for vacancy and maintenance. A property renting for $600 per week contributes $24,960 per year to serviceability, not the full $31,200.
Can I still negatively gear an investment property purchased in 2026?
Properties acquired on or after 7:30pm AEST on 12 May 2026 are subject to loss quarantining from 1 July 2027, meaning rental losses can only be offset against other residential rental income or carried forward. Properties held before that time, and eligible new builds, retain access to negative gearing under existing rules.
What is the maximum LVR for an investment loan?
Most lenders cap investment loans at 90 per cent LVR. Borrowing above 80 per cent triggers Lenders Mortgage Insurance, which increases upfront costs. A lower LVR improves your rate and widens your choice of lender.
Do lenders assess interest only loans differently?
Lenders assess serviceability on a principal and interest basis even when you elect an interest only period. If the loan does not pass serviceability at principal and interest repayments, the application will not proceed regardless of the repayment type you prefer.
