When to Get an Investment Loan Pre-Approval

Get your investment loan pre-approval before you start inspecting properties, not after you find one you like. It tells you what a lender may be willing to lend, so you can search within a realistic price range and protect your family's finances.

For investors in Fairfield and nearby suburbs, the key decision is timing. Applying too early can mean the approval lapses before you buy. Applying too late can leave you bidding without knowing your limit. This article helps you choose the right moment and prepare for it.

When Is the Right Time to Apply for Investment Loan Pre-Approval?

The right time is once you have decided to buy, your deposit is largely in place, and you are ready to inspect properties within the next few weeks. A pre-approval is conditional and lasts for a limited period that varies by lender, so it should match your buying timeline.

If you are still deciding between buying and waiting a year, a borrowing capacity estimate is usually enough at that stage. Once you are making offers, a pre-approval gives you a firm working figure. It remains subject to the lender's valuation of the property you choose and their final checks.

If your approval runs out before you buy, some lenders may allow it to be reassessed, but this depends on the lender. Your income, debts and living expenses would be looked at again, so keep your finances steady while you search.

How Much Can I Borrow for an Investment Property?

Your investment loan amount depends on your income, debts, living expenses, deposit and the lender's credit policy. Banks must also test whether you could still afford repayments if the interest rate were 3.0 percentage points higher than the loan's rate.

That buffer applies to banks, credit unions and building societies regulated by APRA. Non-bank lenders are not bound by it, which is one reason a broker compares across a wide panel. Your expected rent also counts, but APRA's guidance is that lenders should count no more than 80 per cent of it, to allow for vacancies. Lenders generally put less weight on a rental appraisal than on actual rent received.

Other debts reduce your capacity. A credit card limit you never use can still lower what you can borrow, because lenders assess the limit, not the balance. Closing unused cards before you apply can lift your figure. The trade-off is that you lose that credit line.

Interest-Only or Principal and Interest: What Changes the Numbers?

An interest-only loan lowers your repayments for a set period, but it does not increase how much you can borrow. Lenders assess interest-only loans as if principal and interest repayments will apply over the remaining term after the interest-only period ends.

The main trade-off is that you do not reduce the loan balance during the interest-only period, and repayments rise when it ends. Interest is deductible on an investment loan under either structure, but only the interest part of a principal and interest repayment is deductible. Your accountant can explain what this means for your situation.

Consider an investor with a $600,000 loan. All figures below use an illustrative rate of 6.75% p.a. and a 30-year term.

• Interest-only: about $3,375 a month.
• Principal and interest over 30 years: about $3,892 a month.
• Interest-only for 5 years, then principal and interest over the remaining 25 years: about $4,145 a month.

The final figure is the one to plan around. The investor saves about $517 a month early on compared with principal and interest, then faces a repayment about $770 a month higher than the starting interest-only amount. A pre-approval that tests the later repayment shows whether the strategy still works after the interest-only period ends. You can run your own numbers through a repayment calculator, or ask us to model them.

What Does a Lender Look at in an Investment Loan Application?

A lender looks at your income, existing debts, living costs, deposit and credit history, along with the type of property you are likely to buy. A property investor loan application is also assessed on the rental income you expect.

Your deposit matters because of the loan-to-value ratio (LVR). Borrowing above 80 per cent of the property's value generally means paying Lenders Mortgage Insurance (LMI), which is a cost to you and adds to your total outlay. Each lender sets its own maximum LVR and its own rules on how a deposit must be saved, so the right lender for you depends on your position.

If you already own a home or investment property, you may be able to use equity in it for the deposit. The borrowed amount must then be used for the investment to be considered for tax deductions. Using some of it for personal spending changes how much interest is deductible. Equity release also increases your total debt, which raises your risk if rates rise or the property sits vacant.

A Pre-Approval Scenario: Setting a Ceiling Before You Search

As an example, consider a Fairfield couple who plan to buy their first investment property while raising two young children. They have a deposit and an offset balance, and they are unsure how much to spend.

Their broker reviews their income, a car loan and a credit card limit. Cancelling the unused card and finishing the car loan early is likely to raise their assessed borrowing capacity, though this depends on the lender and their finances. The pre-approval comes back with a ceiling comfortable enough to leave room for school fees and family costs. They set their search budget below that ceiling to allow for rate rises and vacancy periods.

When they find a property, the lender values it and confirms the approval. Because the couple already knew their limit and their repayment range, they could make an offer without second-guessing. The outcome is a purchase inside a budget they planned in advance. The cost is that they gave up the cash from the car loan payout and the card limit, and the lender may charge early repayment fees on the car loan. Those choices suited their goals.

How Do Tax Rules Affect Your Investment Property Plans?

The tax treatment of rental losses depends on when you buy the property and what type it is, so check your plan with your accountant before you commit. Mortgage brokers generally cannot give tax advice, so confirm the tax treatment with a registered tax professional or accountant.

Under legislation passed in 2026, losses on residential investment properties held at 7:30pm AEST on 12 May 2026 continue to be deductible against other income, including salary and wages. Losses from eligible new builds acquired after that date can also continue to be deducted against all income. From the 2027-28 income year, net rental losses on established residential properties bought after that time can only be offset against other residential property income, including capital gains. Excess losses can be carried forward. The capital gains tax discount is also scheduled to change from 1 July 2027 for gains accruing from that date.

These changes affect how a loss is used, not whether interest is deductible. If you are weighing an established property against a new build, ask your accountant to model both before you finalise your pre-approval amount.

Should You Refinance Existing Debt Before Applying?

Reviewing your existing loans before applying can strengthen your position, because your current debts directly affect how much a lender will approve. Lenders check the balance, interest rate and remaining term on each loan.

If an existing loan has a higher rate than you need to pay, refinancing may lower your repayments and lift your capacity. Costs such as discharge and valuation fees may apply, and these vary by lender. A loan health check shows where you stand before you commit to anything.

What you do next depends on your goals. Our investment loans page explains the options we compare, and our Fairfield broker page has local contact details. Call one of our team or book an appointment at a time that works for you, and we will work out a pre-approval that fits your family and your plans for growth.

Frequently Asked Questions