The Property Type Determines Your Loan Structure
The type of investment property you're looking at changes what lenders will offer you. A two-bedroom unit in central Hornsby comes with different loan terms than a four-bedroom house in Berowra Heights, and those differences show up in your deposit requirements, interest rates, and how much you can borrow.
Consider someone buying a $750,000 unit in one of the apartment buildings near Hornsby Westfield. With body corporate fees around $1,200 per quarter and an estimated rental income of $620 per week, lenders assess this differently than a standalone house. The loan to value ratio (LVR) might be capped at 80% instead of 90%, which means you'd need a $150,000 deposit plus stamp duty rather than $75,000. The rental income calculation also changes because lenders typically apply a higher vacancy rate to units, sometimes 5% instead of 3%, which reduces how much rental income they'll count toward your borrowing capacity.
How Units and Apartments Affect Your Investment Loan
Units and apartments usually require higher deposits when you're purchasing as an investment. Lenders see these properties as having more volatile values, particularly in buildings with higher apartment counts. If you're looking at something in the established apartment stock around the Hornsby CBD, you'll likely need at least a 20% deposit to avoid Lenders Mortgage Insurance (LMI), whereas a house might let you stretch to 10% with LMI included.
The interest rate offered can also differ. Some lenders add a small margin to their standard investor interest rates for units above a certain floor level or in buildings with more than 50 apartments. When calculating investment loan repayments, this margin might only be 0.10% to 0.15%, but over a 30-year loan on $600,000, those basis points add up. The flip side is that units in Hornsby's established areas often generate stronger rental yields than houses, which improves your passive income position even if the financing costs slightly more.
Townhouses and Torrens Title Properties
Townhouses sit somewhere between units and houses in how lenders assess them. A three-bedroom townhouse in Asquith with its own land title gets treated more like a house, even if there's a shared driveway or minimal common property. The key difference is the Torrens title versus strata title distinction. Torrens title usually means access to better investor borrowing terms.
In our experience, townhouses with smaller body corporate structures tend to perform well for investment loans because ongoing costs are lower than high-rise units but rental demand remains strong. A townhouse near Hornsby Hospital might cost $900,000 with body corporate fees of just $400 per quarter, compared to $1,200 or more for a comparable unit. That difference matters when you're trying to maximise tax deductions and keep the property cash flow neutral or positive. Lenders also recognise this, which is why you'll often see variable rate options with rate discount offerings that match or come close to owner-occupied loans.
Standalone Houses as Investment Properties
Houses offer the most flexible investment loan options because lenders view them as lower risk. If you're buying an investment property in the form of a three or four-bedroom house in one of the established pockets around Hornsby, you'll typically find more lenders willing to offer higher LVRs and interest only investment structures without additional overlays.
As an example, someone purchasing an $1,100,000 house near Normanhurst might secure an interest only loan at 90% LVR with LMI, borrowing $990,000. The interest only structure keeps repayments lower during the early years, which can support negative gearing benefits while building wealth through property appreciation. After five or ten years on interest only, you could refinance to access equity release for portfolio growth, or switch to principal and interest repayments as your income rises and the tax benefits shift.
Houses also tend to attract families as tenants, which can mean longer tenancy periods and lower turnover. That stability helps when you're forecasting rental income for your property investment strategy and planning around claimable expenses.
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Fixed Rate Versus Variable Rate for Different Property Types
Your choice between fixed interest rate and variable interest rate products should connect to the property type you're buying. Units often benefit from variable rate loans because you'll want the flexibility to refinance or sell if market conditions shift, particularly in areas with high apartment supply. Hornsby has seen periods of strong unit construction, and holding a variable loan lets you react without paying break costs.
Houses, especially in tightly held areas, might suit a split approach where part of the loan is fixed for rate certainty and part remains variable for flexibility. If you're holding the property long-term as part of building wealth through property, locking in a portion of your borrowing at a fixed rate can smooth your cash flow during the fixed period, while the variable portion lets you make extra repayments or leverage equity when opportunities arise.
What Lenders Look at Beyond Property Type
Property type is just one factor in your investment loan application. Lenders also assess the specific location within Hornsby, the condition of the property, and how the rental income compares to the loan repayments. A well-maintained house close to Hornsby train station will get stronger loan terms than a similar house further out, even though both are houses.
The loan amount you can access also depends on your overall borrowing capacity, which includes your existing debts, income, and living expenses. If you already own your home and you're looking to buy an investment property, lenders will assess whether the rental income covers enough of the new loan to keep your total debt servicing within their limits. This calculation changes depending on whether you choose interest only or principal and interest repayments, and whether you're planning to use equity from your existing property as part of the investor deposit.
Using Equity from Your Hornsby Home
Many property investors in Hornsby already own their home and are looking to use that equity to fund their next purchase. If your home has increased in value, you might be able to borrow against that equity without selling. This approach can reduce or eliminate the need for cash savings as your deposit, which accelerates your property investment strategy.
Lenders will typically let you access equity up to 80% of your home's value, minus what you still owe. If your Hornsby home is worth $1,200,000 and you owe $400,000, you could potentially access $560,000 in equity. That's often enough to cover a 20% deposit and stamp duty on an investment property, letting you avoid LMI on the new purchase while keeping your existing home loan separate. Structuring it correctly means you can still claim interest on the investment portion as one of your claimable expenses, which feeds into your overall tax benefits.
If this sounds relevant to your situation, a loan health check on your existing home loan can identify how much equity you have available and whether your current loan structure supports this approach or needs adjusting through a refinance.
Call one of our team or book an appointment at a time that works for you. We work with property investors across Hornsby and surrounding areas, and we can talk through your specific situation to find investment property finance options that match the type of property you're targeting and the portfolio growth you're working toward.
Frequently Asked Questions
Do I need a bigger deposit for a unit than a house as an investment property?
Yes, most lenders require a higher deposit for investment units, often capping the loan to value ratio at 80% instead of 90%. This means you'll need at least a 20% deposit to avoid Lenders Mortgage Insurance on a unit, whereas you might only need 10% plus LMI for a house.
Can I use equity from my Hornsby home to buy an investment property?
You can access equity from your existing home up to 80% of its value, minus what you owe. If you have enough available equity, you can use it as a deposit on an investment property without needing cash savings, though the lending structure needs to be set up correctly to maximise tax deductions.
Does property type affect investment loan interest rates?
Some lenders add a small margin to investor interest rates for units, particularly in high-rise buildings or apartments above certain floor levels. Houses and Torrens title townhouses typically receive the most favourable investor interest rates because lenders view them as lower risk.
Should I choose a fixed or variable rate for an investment property loan?
Variable rates suit units and properties you might sell or refinance within a few years, as they avoid break costs. Houses held long-term often benefit from a split approach, with part of the loan fixed for rate certainty and part variable for flexibility.
What is the difference between interest only and principal and interest for investment loans?
Interest only repayments are lower each month because you're not paying down the loan balance, which can support negative gearing and cash flow in the early years. Principal and interest repayments reduce the loan over time and build equity, but cost more each month.
