An investment loan lets you borrow against your deposit or equity to purchase a rental property, with the loan structure designed to suit someone who earns income from the property rather than living in it.
Victoria Park sits close to the CBD, draws renters who work in the city and nearby commercial precincts, and has a mix of established townhouses and newer strata developments. The rental market here supports both young professionals and small families, particularly around the Burswood peninsula and the streets near Millers Pool.
How an Investment Loan Differs From an Owner-Occupier Loan
Lenders treat investment loans as higher risk than owner-occupier lending, so they apply different risk weights and pricing structures. You'll generally pay a higher variable or fixed rate on an investment loan compared to a home loan for the same property and deposit size. Interest-only repayment options are more common on investment loans because they reduce monthly outgoings and let you claim a larger deduction against your taxable income.
Lenders also assess serviceability differently. They'll include rental income in your borrowing capacity, but they apply a reduction to account for periods when the property might be vacant. Most lenders use a 20 per cent vacancy buffer, so if your townhouse is expected to generate $500 per week in rent, the lender will only use $400 in the serviceability calculation.
What Deposit You'll Need for a Townhouse Investment
Most lenders require a minimum 10 per cent deposit for an investment property, but anything below 20 per cent will trigger Lenders Mortgage Insurance. That premium is calculated on the loan amount and the loan to value ratio, and it can add several thousand dollars to your upfront costs.
Consider a buyer who has $60,000 in accessible savings and is looking at a townhouse in the Victoria Park area. If the property is valued at $550,000, a 10 per cent deposit leaves them with an LVR of 90 per cent once the LMI premium is capitalised into the loan. At that level, LMI could add $15,000 to $18,000 to the total borrowing, depending on the lender and your credit profile. If the same buyer waits and saves a 20 per cent deposit, they avoid LMI entirely and access lower interest rate pricing.
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Interest-Only Repayments and When They Make Sense
An interest-only period lets you pay only the interest portion of the loan for a set term, usually one to five years. Your loan balance doesn't reduce during this time, but your monthly repayment is lower, which can improve your cash flow and increase the amount of interest you can claim as a tax deduction.
Interest-only loans suit investors who want to maximise deductions or who plan to use surplus income to service other debt or purchase additional properties. Once the interest-only period ends, the loan reverts to principal and interest repayments, and the repayment amount increases to cover both the interest and the remaining loan term.
If you're applying for an interest-only loan with an LVR above 80 per cent and the interest-only term exceeds five years or isn't specified, the loan is classified as non-standard under current prudential rules, which can affect the lender's pricing and your eligibility.
How Lenders Assess Rental Income in Victoria Park
Lenders will either accept a rental appraisal from a licensed property manager or use a published rental estimate if you haven't yet settled on the property. A two-bedroom townhouse close to the Burswood train station or near Millers Pool typically commands higher rent than a similar property further east along Albany Highway, because of proximity to public transport and the river.
The rental income is reduced by the vacancy buffer and then added to your other income when the lender calculates your borrowing capacity. If your townhouse is expected to rent for $520 per week, the lender will use 80 per cent of that figure, or $416 per week, in the serviceability assessment. That equates to roughly $21,600 per year in recognised rental income, which can make the difference between an approval and a decline if your salary alone doesn't cover the serviceability buffer.
Body Corporate Costs and How They Affect Your Borrowing
Townhouses in strata complexes come with quarterly or annual body corporate fees, and those fees are treated as an ongoing expense when lenders assess your loan application. A typical townhouse in Victoria Park might have body corporate fees between $800 and $1,500 per quarter, depending on the size of the complex and the shared facilities.
Those fees reduce your net rental income and increase your total expenses, which tightens your borrowing capacity. If you're already close to the serviceability limit, higher body corporate costs can push the application over the line into a decline. When comparing townhouses, look at the body corporate schedule and factor those costs into your cash flow forecast before you make an offer.
Choosing Between Variable and Fixed Rates for Investment Properties
Variable rates let you make extra repayments and access features like offset accounts, which can reduce the interest you pay over time. Fixed rates lock in your repayment for a set term, usually one to five years, and protect you from rate rises during that period. You can also split your loan between variable and fixed portions.
For investment properties, offset accounts are particularly useful if you're on a variable rate. Any balance in the offset account reduces the interest charged on the loan, but the full loan amount remains available for tax deduction purposes. That means you can park your rental income and other savings in the offset and reduce your interest costs without affecting your deductibility.
Some lenders offer rate discounts for investors who borrow above a certain threshold or who have an existing lending relationship. Those discounts can range from 0.10 per cent to 0.50 per cent depending on the loan amount and your overall credit position. An investment mortgage broker will identify which lenders offer the most competitive pricing for your scenario.
Negative Gearing and What Changed in the Most Recent Tax Reforms
If your interest, body corporate, council rates and other holding costs exceed the rental income you receive, the property is negatively geared. For townhouses purchased before 12 May 2026 or for eligible new builds acquired after that date, you can claim the loss against your salary or other income and reduce your overall tax.
From the 2027-28 income year, losses on established investment properties purchased after 12 May 2026 can only be offset against other residential property income, including capital gains when you sell. Excess losses carry forward to future years. If you're buying an established townhouse in Victoria Park now, it's important to understand that the tax treatment of any loss will be different from the properties investors may already own.
Refinancing an Investment Loan as Your Portfolio Grows
Once you've built equity in your Victoria Park townhouse, you can refinance to release that equity and use it as a deposit on a second investment property. Lenders will reassess your borrowing capacity at that point, taking into account the rental income from your existing property, any remaining debt on the original loan, and the new loan you're applying for.
Investment loan refinancing also lets you move to a lender with lower rates or different loan features, which can improve your cash flow and reduce the amount of interest you pay over the life of the loan. If you originally took out the loan with LMI and your LVR has since dropped below 80 per cent, refinancing can give you access to pricing that reflects the lower risk.
Accessing Equity Without Refinancing the Whole Loan
Some lenders let you establish a separate loan or line of credit secured against the equity in your townhouse, without refinancing the original investment loan. This approach works well if you're on a low rate or if you're still within a fixed rate term and don't want to trigger break costs.
The equity loan is treated as a separate facility, so you can use it for a deposit on another property, for renovations or for any other investment purpose. Interest on borrowings used to acquire or improve a rental property remains deductible, but interest on borrowings used for private purposes is not.
Call one of our team or book an appointment at a time that works for you. We'll walk through your income, your deposit position and the rental yield on the property you're looking at, and we'll show you which lenders will support your application and what loan structure makes sense for where you are now and where you're planning to go.
Frequently Asked Questions
What deposit do I need to buy an investment townhouse in Victoria Park?
Most lenders require a minimum 10 per cent deposit for an investment property, but you'll pay Lenders Mortgage Insurance if your deposit is below 20 per cent. That premium can add several thousand dollars to your upfront costs and is calculated based on your loan amount and loan to value ratio.
How do lenders treat rental income when assessing my borrowing capacity?
Lenders include rental income in your serviceability calculation but apply a vacancy buffer, usually around 20 per cent. If your townhouse is expected to rent for $500 per week, the lender will only use $400 in the assessment to account for potential vacancy periods.
Can I still negatively gear an established townhouse I buy now?
If you purchased the townhouse before 12 May 2026 or if it's an eligible new build, you can claim losses against your salary and other income. For established properties purchased after that date, losses can only be offset against other residential property income from the 2027-28 income year onwards.
What happens to my repayments when my interest-only period ends?
Once the interest-only term expires, your loan reverts to principal and interest repayments. Your repayment amount will increase because you're now paying down both the interest and the loan balance over the remaining loan term.
Do body corporate fees affect how much I can borrow?
Yes, body corporate fees are treated as an ongoing expense by lenders and reduce your net rental income. Higher fees can tighten your borrowing capacity, particularly if you're already close to the serviceability limit for the loan amount you're applying for.
