Investment loan

First investment property or fifth, PAYG or self-employed. If you are building a portfolio, the loan structure matters as much as the rate.

The people we see most are buying their first investment after building equity in their own home, buying a second or third property and finding the bank less enthusiastic than last time, or moving out of a home they intend to keep and rent. Each of those is a different lending problem even though they look alike from the outside.

Rate gets the attention. These five usually matter more to how the portfolio performs over ten years.

Who buys the property. Lenders take a different view of each borrowing entity: an individual borrower, a trading company, a discretionary trust and a unit trust are all assessed differently.

Interest-only or principal and interest. Interest-only keeps the monthly cost down and, for some investors, suits how the property is being held. It also means the balance is not reducing, and the shorter remaining term after the interest-only period ends lifts the repayment sharply. The example below shows both sides of that trade.

How the deposit is funded. Using equity in your home rather than cash is common, but it matters whether the two properties end up cross-secured. Cross-securitisation ties the properties together and can make selling one, or moving one loan, considerably harder later.

Which lender reads you best. Lenders differ on how much rental income they count, how they treat negative gearing, and how they assess the repayments on debt you already hold. The same application can pass at one lender and fail at another on those policies alone.

Room for the next purchase. A structure that works today can block the one after it. This is the part we think about first if you have told us there is a next one.

Where an application proceeds and is approved, four to six weeks from first conversation to unconditional approval is common. The steps below are indicative: assessment and valuation timeframes belong to the lender, not to us.

1. The conversation. An obligation-free discussion about your financial position, what you are buying and what you expect to do next. This is where we find out whether there is a purchase after this one.
2. Structure and borrowing power. We model the options across the panel: interest-only against principal and interest, offset accounts, and how each lender treats rental income and existing debt. You see what each structure does to the monthly cost and the total.
3. Pre-approval. Where it helps you bid or negotiate with confidence, we arrange pre-approval first. It is conditional and it can be withdrawn, so it is a strong indication rather than a commitment.
4. Application and valuation. Once you have a property, the lender assesses the application against its own criteria and values the property. A valuation below the purchase price changes the deposit required.
5. The lender decides. If the lender approves, formal approval is issued and loan documents follow. Approval is the lender's decision alone, and it is never certain until it is given.

Serviceability buffers are stricter for investors, and structure decisions can have tax consequences. We arrange the finance and work alongside your accountant on the rest.

Three things cost investors more than a slightly higher rate. Cross-securitisation, because it removes your freedom to sell or refinance one property independently. Interest-only periods that end without a plan, because the repayment step-up arrives whether or not the rent has moved. And counting on rental income that assumes no vacancy, no rate rise and no maintenance year.

Property values fall as well as rise. A loan sized against an optimistic valuation becomes uncomfortable quickly if the market moves the other way, particularly where the deposit came from equity rather than cash.