Investment Loans & Buying an Apartment

Purchasing an apartment as an investment requires a different approach than buying a house, particularly when it comes to how lenders assess the property and what they'll require from you upfront.

Most lenders want a minimum 10% deposit for an investment property, though some will consider 5% if you're also purchasing your home at the same time or have existing equity. The loan-to-value ratio matters more with apartments because lenders apply stricter rules around location, building size, and body corporate arrangements. If you're looking at a one-bedroom unit in a complex with more than six storeys, expect some lenders to decline outright, while others may ask for a larger deposit or apply a higher interest rate to offset their perceived risk.

Why Lenders Treat Apartments Differently

Lenders see apartments as higher risk than houses because they're harder to sell if you default, and their value can be more volatile. A complex with more than 50% non-owner-occupiers may be flagged as high-density investor stock, which limits your investment loan options. The same applies to buildings with known defects, incomplete common property, or ongoing disputes with developers. Body corporate records become part of the lender's assessment, not just your income and savings.

Wantirna has a mix of smaller walk-up complexes and newer mid-rise developments along Stud Road and around Wantirna Mall. The older brick units near Mountain High and Lewis Park are generally well-received by lenders because they're low-density, owner-occupied, and have decades of maintenance history. Newer buildings closer to EastLink may attract more scrutiny depending on the number of levels and total units in the complex.

Borrowing Capacity With Rental Income

Lenders calculate your borrowing capacity by adding 80% of the expected rental income to your current income, then subtracting all your existing debts and living expenses. The 80% figure accounts for vacancy periods, maintenance costs, and body corporate fees that you'll still need to cover when the property isn't tenanted. If the apartment you're buying has a current tenant in place, you'll need to provide a copy of the lease. If it's vacant, the lender will use a rental assessment based on comparable properties in the area.

Consider a buyer who earns a combined household income and wants to purchase a two-bedroom apartment in Wantirna as their first investment. They have a 15% deposit saved and expect the property to rent at around current local rates for similar apartments. The lender calculates serviceability using 80% of that rental income, which helps offset the additional loan commitment but doesn't fully cover the repayments. They still need to demonstrate they can service both their current home loan and the new investment loan from their salary, even if the property sits vacant for a month or two.

Interest Only vs Principal and Interest

Interest-only repayments are common for investment loans because they reduce your monthly outgoings and maximise your tax deductions in the early years. You're only paying the interest charged each month, not reducing the loan balance, which means your repayments stay lower and your net rental loss stays higher for negative gearing purposes. Most lenders offer interest-only periods of one to five years, after which the loan converts to principal and interest unless you apply to extend it.

The downside is that you're not building equity through loan reduction, only through capital growth. If property values stagnate or fall, you'll still owe the full amount you borrowed. Principal and interest repayments are higher each month but reduce your debt over time, which can make refinancing or accessing equity later on more straightforward. The choice depends on your cash flow, your tax position, and whether you're planning to hold the property long-term or sell within a few years.

How the 2027 CGT and Negative Gearing Changes Affect Apartment Investors

From 1 July 2027, capital gains tax and negative gearing rules will change for established residential properties purchased after 12 May 2026. The 50% CGT discount will be replaced with inflation-based indexation and a minimum 30% tax on gains. Negative gearing losses will only be deductible against other residential property income, not against your salary or wages, though you can carry forward unused losses to offset future rental income or capital gains.

If you purchased your Wantirna apartment before Budget night in May 2026, you're grandfathered under the old rules. If you're buying now or in the future, the tax treatment shifts. New builds remain exempt, meaning investors purchasing brand-new apartments can still choose between the old 50% discount or the new indexation method, whichever is more favourable. For established apartments, the changes mean you'll pay more tax on the gain when you sell and receive less immediate tax relief while you hold the property.

This doesn't make apartment investment unviable, but it does change the numbers. You'll want to model your expected rental yield, capital growth, and holding period with a tax professional before committing. The ability to carry forward losses means they're not wasted, but the cash flow impact during ownership will be higher than it would have been under the previous system.

What Lenders Want to See in Your Application

Your investment loan application needs to demonstrate that you can service the debt without relying entirely on rental income. Lenders will ask for recent payslips, tax returns if you're self-employed, and a full list of your current debts including credit cards, personal loans, and any other mortgages. They'll also want a copy of the contract of sale, a rental appraisal or current lease agreement, and body corporate records showing levies, sinking fund balance, and any upcoming special levies.

If the body corporate has less than six months' worth of levies in the sinking fund, or if there's a special levy planned for major works, some lenders will decline the property altogether. Others will lend but reduce the maximum loan-to-value ratio or exclude the cost of the levy from their valuation. You won't always know these details until your conveyancer reviews the strata records, which is why it's worth getting that done early in the process rather than waiting until after finance approval.

Variable or Fixed Rate for Investment Loans

Variable rates give you flexibility to make extra repayments, redraw funds, or refinance without break costs. Fixed rates lock in your repayment amount for a set period, which can help with budgeting and protect you if rates rise, but you'll pay break costs if you need to exit early or refinance before the fixed term ends. Some investors split their loan between variable and fixed to balance certainty with flexibility.

Rate discounts depend on your deposit size, loan amount, and whether you're borrowing for investment or owner-occupied purposes. Investment loans typically attract a higher interest rate than home loans, though the gap has narrowed over the past few years. If you're refinancing an existing investment loan, you may be able to access a lower rate than you're currently paying, particularly if your loan-to-value ratio has improved due to capital growth or loan repayments.

Claimable Expenses and Ongoing Costs

Interest, body corporate fees, council rates, water charges, property management fees, repairs, and depreciation are all claimable against your rental income. Stamp duty and legal fees are not immediately deductible but can be included in your cost base when you calculate capital gains tax at sale. Lenders Mortgage Insurance, if you pay it, is also added to your cost base rather than claimed as an annual deduction.

Body corporate levies in Wantirna vary depending on the age and size of the complex. Older walk-up blocks might charge a few hundred dollars per quarter, while newer buildings with lifts, gyms, and pools can run several thousand per year. Lenders treat these levies as a fixed cost and deduct them from your rental income when calculating serviceability, so a high body corporate fee reduces how much you can borrow just as much as a high car loan or credit card limit would.

If you're looking at purchasing an apartment as part of a long-term wealth strategy, the ongoing holding costs need to fit within your cash flow even during vacancy periods. Rental yields on apartments in Wantirna are generally higher than houses due to the lower purchase price, but vacancy rates can be higher too, particularly in complexes with a large number of similar units competing for the same tenant pool.

Call one of our team or book an appointment at a time that works for you to talk through your deposit, borrowing capacity, and which lenders will support the specific property you're considering.

Frequently Asked Questions