Setting up your first or next investment loan comes down to deposit, structure, and what happens when the rules change.
Eastwood investors have been paying attention since the negative gearing changes were announced in mid-2026. If you bought your current investment property before 7:30pm on 12 May 2026, the old rules still apply. If you're buying now or planning to buy, you need to understand how quarantined losses, eligible new builds, and the shift in capital gains tax treatment will shape your borrowing and your long-term return.
The difference between a loan that works and one that holds you back usually shows up three to five years in, when you want to buy again or refinance. The structure you choose now determines how much equity you can access later and whether your borrowing capacity holds up when the bank reassesses your position.
What Deposit Do You Need for an Investment Loan
Most lenders require a 20 per cent deposit to avoid Lenders Mortgage Insurance on an investment loan. A smaller deposit is possible, but LMI adds to your upfront cost and the premium is capitalised into the loan, which increases your repayments and reduces the amount you can borrow next time.
If you're using equity from an existing property, the bank will lend against 80 per cent of that property's value minus what you owe. The rest needs to come from genuine savings or other unencumbered assets. In our experience, buyers who structure their deposit using a separate loan secured against their home maintain a cleaner separation between owner-occupied and investment debt, which becomes relevant if you sell the home or refinance either property independently.
Consider a buyer with a home valued at $1.2 million and an outstanding mortgage of $600,000. The bank will lend up to 80 per cent of $1.2 million, which is $960,000, less the $600,000 owed. That leaves $360,000 in accessible equity. After holding back a buffer for costs and the deposit, that buyer could comfortably fund a 20 per cent deposit on a property in the mid-to-high price range typical of Eastwood's unit and townhouse stock.
Interest Only or Principal and Interest
Interest-only repayments keep your monthly cost lower and preserve cash flow, which matters if you're holding multiple properties or relying on rental income to service the loan. Most lenders offer interest-only terms of one to five years on investment loans, after which the loan reverts to principal and interest unless you apply to extend.
The advantage is that your deductible interest expense stays higher for longer, and you free up capital to reinvest or buffer against vacancy. The disadvantage is that your loan balance doesn't reduce, so when the interest-only period ends, your repayments can jump sharply. We regularly see this become a problem for investors who didn't plan for the reversion or whose circumstances changed during the interest-only period.
Principal and interest repayments reduce your loan balance from day one, which builds equity faster and lowers your risk if property values stagnate. If your goal is to hold long term and you don't need the cash flow flexibility, paying down the loan can make sense. The choice depends on whether you're prioritising portfolio growth or debt reduction.
Variable Rate, Fixed Rate, or Split
Variable rates give you flexibility to make extra repayments, redraw funds, and refinance without penalty. Fixed rates lock in your repayment and protect you from rate rises, but they come with restrictions. Most fixed loans limit extra repayments to around $10,000 to $30,000 per year, and breaking a fixed loan early can trigger break costs that run into the thousands.
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A split loan divides your borrowing between variable and fixed portions. It's a middle path, and it works well if you want some certainty around repayments without losing all flexibility. In a rising rate environment, a partial fix can reduce your exposure. In a falling rate environment, the variable portion benefits immediately while the fixed portion holds you back.
The decision should be informed by your cash flow position, how long you plan to hold the property, and whether you expect to refinance or sell within the fixed term. If you're buying an eligible new build and expect strong early growth, locking in a rate might reduce your ability to access that equity when you need it.
What Eastwood Investors Are Buying Under the New Rules
Eastwood sits within the Parramatta local government area, and it's a mix of established low-rise units, townhouses, and a handful of detached homes. The area attracts owner-occupiers and investors because of proximity to the station, schools, and the commercial spine along Rowe Street. Rental demand is steady, supported by professionals working in Macquarie Park and Parramatta, as well as international students and families.
Since the negative gearing changes took effect, there's been a noticeable shift toward eligible new builds. These properties allow you to offset rental losses against other income, which makes a material difference if you're in a higher tax bracket and holding the property through the early years when rental income doesn't cover the mortgage.
A new build also gives you access to the 50 per cent capital gains tax discount when you sell, rather than the indexed cost base with a 30 per cent minimum tax rate that applies to established properties purchased after mid-2026. For an investor planning to hold for ten to fifteen years, that difference in after-tax return can be significant.
The supply of eligible new builds in Eastwood is limited, and competition has pushed prices up relative to older stock. You need to assess whether the tax advantage and future CGT treatment justify the price premium, or whether an established property in a neighbouring suburb with stronger rental yield makes more sense.
How the Debt-to-Income Cap Affects Your Borrowing
Since 1 February 2026, lenders have been restricted in how many loans they can write above six times your gross income. The cap applies separately to investment and owner-occupier loans, and it's measured across each lender's portfolio rather than on a case-by-case basis.
If your income is $150,000 and you're borrowing $950,000 for an investment property, your debt-to-income ratio sits above six, which means your application falls into the lender's restricted bucket. Some lenders have room under the cap and will still write the loan. Others have already hit their limit and will decline, regardless of your serviceability.
You won't know the lender's position until the application is assessed, which is why working with a broker who tracks each lender's appetite becomes more useful. A decline doesn't mean you can't borrow that amount. It means that particular lender has no capacity under the DTI cap, and you need to apply elsewhere.
The cap doesn't apply to finance for new builds or to bridging loans for owner-occupiers. If you're buying an eligible new residential dwelling, the DTI restriction is removed, which can open up lenders that would otherwise decline.
Loan Features That Matter for Portfolio Growth
An offset account on an investment loan reduces the interest you pay, but it doesn't reduce your tax deduction. Because the interest is deductible, most investors are financially better off keeping surplus cash in an offset against their non-deductible home loan rather than their investment loan.
A redraw facility lets you take back extra repayments you've made, but the tax treatment depends on what you use the withdrawn funds for. If you redraw to fund personal expenses, the interest on that portion is no longer deductible. If you redraw to fund another investment, the interest remains deductible, but you need to keep clear records to satisfy the ATO.
Some lenders allow you to split your investment loan into multiple sub-accounts, each with its own balance and rate. This can be useful if you want to quarantine debt used for different purposes or if you plan to sell the property and transfer part of the loan to a new purchase. Not all lenders offer this, and those that do may charge extra for the structure.
Serviceability and Rental Income
Lenders assess your ability to repay by adding a three percentage point buffer to the loan's interest rate and applying that to your income and expenses. For investment loans, they include a portion of the expected rental income, typically 80 per cent, to account for vacancy and management costs.
If the property is in a block with high body corporate fees or requires significant ongoing maintenance, your net rental position weakens and your serviceability drops. In our experience, investors often underestimate how body corporate and strata costs affect borrowing capacity, especially when they're planning to buy a second or third property.
If you're buying a new unit off the plan, the lender will estimate rental income based on comparable properties in the area. If the building hasn't been completed yet, that estimate can be conservative, which reduces your borrowing capacity. Once the property settles and you have a signed lease, you can provide that to the lender to improve serviceability for future applications.
Refinancing After the Negative Gearing Changes
If you bought your investment property before 7:30pm on 12 May 2026, you're grandfathered under the old rules. You can continue to offset rental losses against your wage or salary income, and you keep the 50 per cent CGT discount when you sell. Refinancing that loan to a new lender or a new product with your existing lender does not change your grandfathered status.
What does matter is if you sell that property and buy another. The new property will be subject to quarantined losses unless it's an eligible new build. This changes the calculus around whether to hold or sell, especially if the property has strong negative gearing benefits but modest capital growth.
Some investors are choosing to hold grandfathered properties longer than originally planned and using equity to fund new purchases rather than selling and reinvesting. The structure of the loan, including whether you can access equity without selling, becomes more important under that strategy.
Claimable Expenses and How Loan Structure Affects Deductions
Interest on your investment loan is deductible, along with loan establishment fees, ongoing account fees, and the cost of any mortgage insurance. Stamp duty on the property purchase is not immediately deductible but forms part of your cost base for capital gains tax.
If you refinance and the new loan amount is higher than the original loan, only the interest on the portion used for investment purposes remains deductible. If you borrow an extra $50,000 to renovate the investment property, that interest is deductible. If you borrow an extra $50,000 to pay for a family holiday, it's not.
The ATO applies a clear purpose test. The tax treatment follows the use of the funds, not the security provided. Keeping separate loan accounts for different purposes makes record-keeping simpler and audit risk lower.
Building a Portfolio Without Overextending
Most investors run into trouble not because they borrowed too much on one property, but because they didn't structure the first loan in a way that let them borrow again. If all your equity is tied up in a fixed loan with no redraw, or your cash flow is fully committed to principal and interest repayments, your ability to buy a second property disappears even if the first property has grown in value.
A loan structure that preserves flexibility, maintains deductible debt at the highest sustainable level, and separates investment and personal borrowing makes it easier to add to your portfolio when the opportunity arises. If you're planning to build wealth through property, the structure matters as much as the deposit or the property you choose.
Call one of our team or book an appointment at a time that works for you. We'll review your current position, run the numbers on your next purchase, and make sure your loan structure supports what you're trying to build.
Frequently Asked Questions
What deposit do I need for an investment loan in Eastwood?
Most lenders require a 20 per cent deposit to avoid Lenders Mortgage Insurance on an investment loan. You can borrow with less, but LMI adds to your cost and reduces future borrowing capacity. If you're using equity from an existing property, the bank will typically lend up to 80 per cent of that property's value minus what you owe.
Should I choose interest only or principal and interest for an investment loan?
Interest-only repayments keep your monthly cost lower and preserve cash flow, which helps if you're holding multiple properties. Principal and interest repayments reduce your loan balance and build equity faster. The right choice depends on whether you're prioritising portfolio growth or debt reduction.
How do the new negative gearing rules affect investment loans?
From 1 July 2027, rental losses on established properties purchased after 12 May 2026 can only be offset against rental income, not your salary or wages. Properties held before that date are grandfathered. Eligible new builds remain fully negatively geared and retain the 50 per cent CGT discount.
Does refinancing an investment loan affect my grandfathered status?
No. If you bought your investment property before 7:30pm on 12 May 2026, you can refinance without losing your grandfathered status under the old negative gearing and CGT rules. What matters is when you purchased the property, not when you refinanced.
How does the debt-to-income cap affect investment borrowing?
Since February 2026, lenders can only write a limited number of investment loans above six times your gross income. If your loan falls above that threshold, some lenders will approve it and others will decline based on their portfolio position. The cap does not apply to eligible new builds.
