How Much Can I Borrow For an Investment Property in Australia?

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Buying an investment property in Australia? Smart move. Real estate investing remains one of the most popular ways to build wealth Down Under. But before you dive in, you need to know how much you can actually borrow for an investment property in Australia. That’s where lenders’ lending criteria come into play.

Borrowing for an investment property in Australia is trickier than a regular home loan. Lenders look at different factors like your existing assets, income, expenses and creditworthiness. The amount you can borrow boils down to your borrowing power.

In this guide, we’ll break down everything you need to know about borrowing for an investment property purchase in Australia. You’ll learn the key factors lenders assess, typical borrowing limits, and tips to maximise your borrowing capacity. Let’s get started.

How Much Can I Borrow on an Investment Property in Australia?

Many banks and other lending institutions in Australia will grant a loan of up to 80% of the property’s purchase price for residential properties and 70% for commercial properties. Some banks will lend as much as 95% if the borrower also agrees to pay Lender’s Mortgage Insurance (LMI).

These rates generally apply to both Australian residents and non-residents with Australian citizenship, meaning expats can secure a loan of 80% of their investment property’s value or even 95% including LMI.

Here’s an example. Mia is an Australian citizen living in Singapore. She’s just bought an investment property in Melbourne for $750,000. She’s in a very strong financial position and, with help from Odin Mortgage, manages to secure the maximum Loan to Value (LVR) rate of 80% with no LMI.

This means she puts down 20% of the property’s price as a deposit and receives a mortgage equivalent to the remaining 80%. With some simple maths, we can work out that she’ll be able to borrow $600,000 at the LVR rate of 80%.

How Much Deposit Do I Need For an Investment Property?

For an investment property, you’ll generally need a deposit of at least 20% of the property’s value. So if you’re looking at a $500,000 property, you’re looking at a $100,000 deposit minimum.

Some lenders may let you put down as little as 10%. But loan-to-value ratios (LVRs) over 80% mean higher interest rates and lender’s mortgage insurance. Not ideal for positive cash flow investing.

What is LMI?

Lender’s Mortgage Insurance (LMI) is a type of insurance you can expect to pay as a borrower if your LVR — the home loan proportional to the property value—is above 80%.

LMI is used as a security by the lender in the event you default on a home loan payment. It’s typically a one-off payment and is calculated based on the property value and your LVR ratio. LMI rates also vary from lender to lender. It can potentially cost tens of thousands of dollars.

What Factors Affect How Much I Can Borrow for an Investment Property in Australia?

The amount you’re able to borrow on an investment property in Australia is influenced by a number of factors, including your citizenship status, serviceability, credit history and, most importantly, the lender’s own assessment of your financial situation.

How Does My Citizenship Status Affect How Much I Can Borrow?

Firstly, let’s consider the role of your citizenship status. If you’re an Australian citizen (including expats), you’ll be eligible for the most competitive Loan to Value (LVR) rates. Here’s a rough outline of how LVR rates can differ depending on your citizenship status:

  • Australian citizen living abroad: 95% + LMI, or 80%
  • Australian permanent resident living abroad: 95% + LMI, or 80%
  • Foreign nationals living abroad: 80%

As you can see, expats are generally entitled to the same home loan rates as Australian residents. Some lenders, however, may adjust their rates slightly to favour Australian residents. When this is the case, it’s usually due to the lender’s policy on foreign currency.

Foreign Currency

As an expat, you’ll likely be paying your loan in a foreign currency. This rarely influences your LVR rate, especially when using popular foreign currencies like USD, SGD, HKD and GBP.

Some lenders, however, may place restrictions on their borrowing limits for less common foreign currencies to protect themselves against fluctuating exchange rates.

This shouldn’t be a major issue if your chosen currency isn’t widely used; at the end of the day, lenders are more concerned about your ability to meet loan repayments, not the price of a foreign currency.

How Do My Finances Affect How Much I Can Borrow?

Your finances will play a large role in how much the lender decides to offer for your loan. To land an LVR of 80% or higher, you’ll first need to show that you can pay back those relatively high home loan payments each month by providing evidence of your income.

As a real estate investor, you may be more likely to be approved for a higher loan compared to applicants who plan to use the property to live in. That’s because banks will often take into account the rental income you’re likely to make on the property as part of your wider earnings.

How Does My Choice of Bank Affect How Much I Can Borrow?

Most banks in Australia lend between 60–80% LVR. Some provide loans of up to 95% LVR, including LMI. Of the “Big Four” banks in Australia, CBA, ANZ and NAB currently offer the maximum LVR rate of 80% with no LMI.

Whether you’ll be offered that magical 80% rate depends on your personal finances and, if you’re an expat, external factors such as fluctuating exchange rates and foreign tax rates. 

Banks ultimately set their own rates and evaluate home loan applications as they see fit; where one bank approves an 80% LVR mortgage application, another could easily reject it.

How Do I Increase My Borrowing Power?

If you have an exemplary financial history, the lender will be more inclined to offer you a larger loan. You can improve your serviceability by paying any existing loans and reducing living expenses. You should also contact a mortgage broker to connect you with the best deals.

For lender’s, calculating the LVR is about assessing risk. Generally, they’ll take three different factors into consideration to establish an appropriate LVR:

  1. Your ability to pay back the loan based on income and expenses;
  2. Your credit score; and
  3. How much security you’re able to offer.

With that in mind, here are several strategies for increasing your borrowing power:

  • Reduce living expenses
  • Pay any outstanding loans
  • Manage credit cards carefully
  • Take a credit check before applying

If you’re interested to know how much a bank is likely to offer you, use our borrowing power calculator.

Commission as Income

There’s an important caveat for home loan applicants who make up a large chunk of their income from commission. Many lenders will only consider your base salary when reviewing your application and forecasting your ability to pay back the loan.

This can make your serviceability appear weaker than it really is if you earn significant money through commission. A mortgage broker can help fight your corner in this situation and secure an LVR rate that fits your real income.

How To Get an Investment Property Loan In Australia

Getting approval for an investment property loan in Australia involves the following key steps:

  • Determine Your Borrowing Power: Use our ‘how much I can borrow’ calculator and speak to our specialists to estimate your maximum borrowing amount.
  • Organise Deposit Funds: You’ll typically need at least a 20% deposit, plus funds to cover lender’s mortgage insurance if applicable.
  • Locate Your Investment Property: Research areas, assess cash flow potential, and find a suitable investment property to purchase.
  • Provide Documentation: Lenders require extensive paperwork like payslips, tax returns, credit reports, rental statements and more.
  • Apply For Pre-Approval: Getting pre-approved makes your offers more attractive to sellers and real estate agents.
  • Formal Approval: Once you’ve found a property, the lender conducts a final credit assessment and property valuation.
  • Settlement and Drawdown: If approved, you’ll finalise the purchase and draw down the investment property loan.

It’s always best to contact a mortgage broker with access to a wide variety of lenders and home loan offerings. Odin Mortgage will help you secure a home loan with a competitive LVR rate that fits your finances and investment strategy. 

Get in touch today to start a conversation about financing your next investment property purchase. Our team is ready to answer your questions and set you up for success.

Get a free Australian mortgage assessment today.

Apply online to get a free recommendation with real rates and repayments.

Frequently Asked Questions

The amount you can borrow for an investment property in Australia depends on several factors, including:

  • Your income and expenses
  • Your deposit
  • The property type and location
  • Your credit score

Lenders mortgage insurance (LMI) is a one-time fee paid to protect the lender if you default on your loan. The cost of LMI varies depending on the loan amount and your LVR.

Absolutely! While it might involve a few extra steps compared to Australian residents, owning an investment property in Australia whilst living in Hong Kong is achievable.

Borrowing for an investment property in Australia as a resident of Hong Kong can be trickier than for Australian residents, but it’s still possible! Here’s a breakdown of what you can expect:

  • Maximum LVR typically 75-80% vs 90-95% for Australian residents
  • Hong Kong income assessed but may use lower Australian tax rates
  • Higher deposits allow higher borrowing amounts
  • Property type and location affect borrowing limits
  • Strong Hong Kong credit history is important

The minimum down payment (deposit) for an investment property in Australia is typically 20% of the property’s value. So if you’re buying a $500,000 investment property, you’ll need a deposit of at least $100,000.

Some lenders may allow deposits as low as 10-15%, but this will mean higher interest rates and lenders mortgage insurance costs. A deposit of 20% or more is considered ideal.

On a $150,000 per year salary in Australia, you could potentially borrow around $800,000 – $1 million for an investment property loan. However, this depends on your:

  • Other income sources
  • Current debt levels
  • Living expenses
  • Creditworthiness
  • Size of your deposit

Even with a high income, lenders assess all your financial commitments carefully. The larger your deposit, the more you may be able to borrow.

There are pros and cons to having an investment property in Australia:

Pros:

  • Potential for capital growth over time
  • Rental income stream
  • Tax benefits like depreciation/deductions
  • Build long-term wealth/equity

Cons:

  • Large upfront costs (deposit, stamp duty etc.)
  • Holding costs if untenanted
  • Property market volatility
  • Requires active management

Whether it’s “worth it” depends on your circumstances and goals. It offers a path to wealth creation but also risks and ongoing responsibilities.

The average return for residential investment properties in Australia is around 5-8% per year. This factors in:

  • Rental yields of 3-4% in capital cities
  • Average capital growth of 3-4% per year

However, returns can vary dramatically based on the property location, housing demand, rental rates achieved, holding costs, and timeframe. Some investors aim for positive cash flow first, others prioritise long-term capital gains.

Strategic purchasing, adding value through renovations, and good property management can help maximise investment returns.

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