Top tips to secure investment loan pre-approval

Pre-approval tells you what you can borrow before you commit to a property.

An investment loan pre-approval is conditional approval from a lender confirming the amount they're prepared to lend you for an investment property, based on your income, expenses, existing debt and deposit. It's valid for three to six months depending on the lender and gives you certainty when making offers or bidding at auction. Without it, you're relying on guesswork.

Why ambulance officers rely on pre-approval before searching

Shift work and overtime complicate serviceability, and lenders treat them differently. Some will accept 100 per cent of your base salary plus a percentage of your average overtime, others discount it heavily or exclude it altogether. Pre-approval locks in the lender's position on your income structure before you start searching, so you know your actual borrowing capacity rather than an estimate. Consider a paramedic earning a base of $85,000 plus $18,000 in average overtime. One lender might assess total income at $98,000, another might assess it at $91,000. That difference can reduce your borrowing power by $40,000 or more, which changes the properties you can afford.

Investment loans for paramedics are assessed at an interest rate buffer of at least 3.0 percentage points above the loan product rate under APRA's serviceability policy. Lenders also apply a debt-to-income lending limit, which means no more than 20 per cent of a lender's new investor loans can go to borrowers with a total debt-to-income ratio of six times or more. If your total borrowing sits at or above that threshold, some lenders will decline your application even if you meet the serviceability test. Pre-approval confirms you're within the lender's appetite before you spend time and money on property inspections.

What lenders assess during an investment loan pre-approval

Lenders assess your gross income, your living expenses, any existing debt repayments, and the hypothetical repayment on the proposed investment loan. They don't assess the rental income from the property you intend to buy because you haven't bought it yet. Instead, they apply a notional rental income, usually 80 per cent of the expected rent, to allow for vacancy and management costs. If you're buying a property expected to rent for $600 per week, the lender will credit $480 per week or roughly $2,080 per month to your serviceability.

Your living expenses are assessed using either your declared expenses or the Household Expenditure Measure (HEM), whichever is higher. HEM is a benchmark figure published by the Melbourne Institute and used by most lenders to set a floor on living expenses. If you declare $2,200 per month in living costs but HEM for your household size and location is $2,800, the lender will use $2,800. That's why reducing discretionary spending before applying won't always improve your serviceability if you're already below HEM.

Lenders will verify your deposit and check it meets genuine savings requirements. Genuine savings means funds you've accumulated over at least three months in your own name, such as balances in a savings account or offset account. Funds from a recent bonus, a gift, or a sale of assets may not qualify unless the lender allows for non-genuine savings. Some low deposit loans for paramedics require only 5 per cent genuine savings if you're accessing a waiver on Lenders Mortgage Insurance, but those waivers typically apply to owner-occupied loans only. For investment loans, you'll generally need at least 10 per cent deposit plus costs, or the full cost of LMI if borrowing above 80 per cent loan-to-value ratio.

How debt-to-income limits affect your pre-approval outcome

From 1 February 2026, lenders can allocate no more than 20 per cent of their new investor lending to borrowers with a total debt-to-income ratio of six times gross income or more. If your gross household income is $110,000 and your total proposed borrowing, including investment and owner-occupied debt, is $660,000 or more, you fall into that high DTI category. You may still be approved, but only if the lender has capacity within their 20 per cent allocation and is willing to use it on your application.

In our experience, borrowers close to the six times threshold benefit from applying through a broker who knows which lenders are still writing high DTI loans in a given quarter. Some lenders exhaust their allocation early in the quarter and stop accepting high DTI applications until the next reporting period. A pre-approval lodged in the first few weeks of the quarter has a higher chance of approval than one lodged late.

Interest only or principal and interest for pre-approval serviceability

You can apply for pre-approval on either an interest-only or principal-and-interest repayment structure. Interest-only investment loans are assessed on the interest-only repayment for the first five years, then on a principal-and-interest repayment for the remaining loan term. Choosing interest only improves your serviceability because the monthly repayment is lower during the interest-only period, which means you can borrow more. However, lenders apply a higher interest rate buffer to interest-only loans, and some apply a higher risk weight under APS 112, which may reduce the loan amount they're prepared to offer or require a larger deposit.

If you're planning to hold the property long-term and want to pay down the loan, apply for pre-approval on a principal-and-interest basis. If you're focused on cash flow and maximising tax deductions, apply for interest only. You can switch between the two structures during the pre-approval period, but you'll need to update the application and the lender will reassess serviceability.

Fixed or variable rate for investment loan pre-approval

Pre-approval can be requested on a variable rate, a fixed rate, or a split between the two. Variable rate investment loans give you full access to offset accounts and allow unlimited additional repayments without penalty. Fixed rate loans lock in your interest rate for one to five years but typically don't offer offset accounts and charge break costs if you repay early or sell the property before the fixed term ends.

Most lenders issue pre-approval on a variable rate by default unless you specify otherwise. The rate used for serviceability is the lender's standard variable investment rate plus the 3.0 percentage point buffer, not the actual rate you'll pay. If you request pre-approval on a fixed rate, the lender will reserve that fixed rate for you for a period of 90 to 120 days depending on the institution. If rates rise during your pre-approval period, you're protected. If rates fall, you can choose not to lock in the fixed rate and revert to the variable rate at settlement.

Using equity from your owner-occupied property to fund the deposit

If you own your home and have built up equity, you can use that equity as your deposit rather than saving cash. The lender will order a valuation on your current property, calculate your available equity as 80 per cent of the property value minus your existing loan balance, and approve a pre-approval for the investment property with that equity as security. You'll end up with two loans: one secured against your home and one secured against the investment property, or a single loan with two properties as security depending on the lender's structure.

Consider an ambulance officer who owns a home valued at $650,000 with a remaining loan balance of $380,000. Usable equity is 80 per cent of $650,000, which is $520,000, minus the existing loan of $380,000, leaving $140,000. That's enough to fund a 20 per cent deposit on a $600,000 investment property plus settlement costs without needing to provide cash savings. Equity release loans for paramedics work the same way and are commonly used to fund investment property deposits.

The downside is that your owner-occupied loan will increase, which increases your total debt and reduces your serviceability for the investment loan. Lenders assess the higher owner-occupied loan balance and the new investment loan balance together when calculating your debt-to-income ratio and monthly repayments. If the combined debt pushes you over the six times DTI threshold or reduces your surplus income below the lender's minimum, your borrowing capacity for the investment property will be lower than if you'd used cash savings.

What to do once your pre-approval is issued

Once pre-approval is issued, you have three to six months to find a property and make an offer. During that period, avoid taking on new debt, changing jobs, or making large cash withdrawals that could affect your financial position. Lenders re-verify your income, employment and credit file before issuing unconditional approval, so any material change can delay settlement or void the pre-approval.

When you find a property, notify your broker or lender immediately and provide the contract of sale. The lender will order a valuation to confirm the property is worth at least the purchase price and will issue unconditional approval subject to standard conditions such as building insurance and final ID checks. If the valuation comes in below the purchase price, you'll need to make up the shortfall with additional cash or renegotiate the sale price. Getting loan pre-approval protects you from that risk by confirming your borrowing capacity upfront, but it doesn't guarantee the property will value at the contract price.

Call one of our team or book an appointment at a time that works for you. We'll assess your income structure, confirm your borrowing capacity and arrange pre-approval before you start your property search.

Frequently Asked Questions