Investment Property Mortgage in Australia: The Ultimate Guide

An investment mortgage is a type of mortgage designed to help investors purchase an income-generating property, allowing them to rent it out or flip it for a profit.

Why is there a specific type of mortgage designed for investors? Because banks treat owner-occupiers and investors differently, making it necessary for you to pick the right type of mortgage to get the most suitable deal and avoid tax complications.

So, you need to go for an investment mortgage loan if you’re purchasing a home as an income-generating asset.

And if that’s what you’re considering, then keep reading this in-depth guide on investment property mortgages. We’ll cover the requirements, rates, and more about this mortgage type today.

What Is an Investment Mortgage?

Let’s say you’re an investor searching for a home to buy as an investment, which you want to rent out for a stable income or flip for a profit.

If you don’t have the money to purchase that income-generating property, you’ll try and get a loan. At this point, you should be looking for an investment property mortgage because that’s the type of mortgage that caters specifically to investors.

Owner-occupied mortgages are designed for people who intend to purchase a new home and reside in it. These mortgages have different terms and conditions, as lenders won’t let you rent out or sell the house, at least for the first 12 months.

Trying to do so with an owner-occupied mortgage could potentially result in tax implications, a black mark on your credit score (which makes other lenders more reluctant to lend you), and you won’t really get the right mortgage offer in the first place.

And that’s why an investment property mortgage exists—to lend money to investors who want to purchase an income-generating property for renting or flipping.

Requirements to Get a Mortgage Loan for Investment Property

The basic requirements are pretty much the same as any other mortgage. You’ll need:

• A good credit score.

• Documents to prove financial stability, such as salary slips or an employment certificate.

• A low debt-to-income ratio, etc.

On top of this, there are two more things that lenders need that are exclusive to investment property mortgages. 

One is a higher deposit amount compared to owner-occupied mortgages. And a verification of the income potential of the property by the lender.

Investment Mortgage Loan Rates

Just like the higher deposit, investment mortgages carry a higher interest rate than owner-occupied mortgages, with options for a fixed or variable interest as usual.

This is because lenders see investors as higher risk compared to owner-occupiers. Why? Because the ability of an investor to repay on time may be directly affected when they fail to sell the house or find a tenant as anticipated. 

However, you can ensure the interest rate doesn’t go any higher if you have a favourable credit score, a low debt-to-income ratio, and documents proving your financial stability.

Working With an Investment Property Loan Broker

Going through a mortgage broker is ideal for getting the right investment mortgage deal based on your unique requirements.

But you do have to do your due diligence and make sure to work with a broker that’s experienced and reputed, with a solid track record.

Koalify is a mortgage broker that checks all these boxes. And with the top 30+ lending partners in Australia, our personalised service can help you find the right mortgage you need, from the right lender.

On top of that, we do not charge you a dime. There are absolutely no service fees or commissions involved, which further solidifies our confidence in our unbiased service and commitment towards the work we do.

Sounds like we’re worth a try? Get in touch with us today.

Common Mistakes to Avoid When Applying for an Investment Mortgage Loan

If you have everything sorted out and are ready to get your investment property mortgage, it would be worth it to look at two of the most common mistakes made by people in your same situation.

You know, just to make sure you don’t fall for them!

Hidden Costs

Investors most likely overlook hidden costs like the house’s maintenance and insurance. While this might only have a minimal impact on owner-occupiers, unexpected costs like these can eat into an investor’s profit. 

So, make sure you’re accounting for hidden costs when calculating your revenue or profit on the house you’re about to buy.

Market Trends and Location Research

The end goal for investors is a stable income by renting out or a profit by flipping the house. Either way, you need to ride the wave of the world if you want a strong ROI.

Most investors just take the plunge without adequate research. You need to do it, identify housing trends, and research locations that are in demand. See if you’re able to find a house to buy that perfectly meets the intersection of these criteria.

It’s a win if you do find one because there’s a good chance the house can sell to tenants or potential buyers on time.

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