When to Review and Optimise Your Investment Loan

Your investment loan should be reviewed whenever your income, your property or your loan terms change. Waiting for a problem is the costly option, so set the check-up date yourself.

Pay for many ambulance officers includes penalty rates and overtime that can vary between pay periods. That mix matters when a lender looks at your loan, and it matters when you decide how to structure it. This article covers the moments worth acting on and the trade-offs that come with each move.

When Should You Review Your Investment Loan?

Review your investment loan when your fixed rate is about to end, your income has risen, your property value has moved, or your lender's pricing no longer suits your situation. Any one of these can change what a better-structured loan looks like.

A fixed rate expiry is the clearest trigger. Loans often roll to a variable interest rate that may sit above what a new borrower is offered, depending on your lender. Our fixed rate expiry calculator shows what comes next. A loan health check is a quick way to see where your current loan stands against your goals.

Interest Only or Principal and Interest: Which Suits Your Investment?

Interest only repayments keep your cash flow higher in the short term, while principal and interest repayments reduce the loan balance as you go. The right choice depends on your cash flow, your goals and how long you plan to hold.

The main trade-off is that an interest only loan does not reduce your debt during the interest only period. When that period ends, repayments rise because the balance is paid off over a shorter remaining term. Lenders also assess your ability to repay on that shorter remaining term, so interest only does not increase how much you can borrow. Learn more about interest only loans for paramedics.

For tax, only the interest portion of a repayment is deductible on a rental property. The principal portion of a principal and interest repayment is not. Speak with your accountant about how this applies to you, as outcomes depend on your circumstances.

Example: Refinancing an Investment Loan Over a Shorter Remaining Term

Switching to a loan with lower pricing can reduce repayments, but you need to compare the full cost of switching before you move.

Consider an ambulance officer with a $500,000 investment loan at the illustrative rate of 6.75% p.a. Interest only repayments on that amount would be about $2,813 a month ($500,000 x 6.75% / 12). Suppose they have five years of interest only left on a 30 year loan. When it ends, the loan reverts to principal and interest over the remaining 25 years. At the same illustrative 6.75% rate, that repayment is about $3,455 a month. That is a rise of roughly $640 a month.

The officer's broker reviews the loan and compares options from lenders across Australia. The aim is to ask for a rate discount, or move to a lender with lower pricing, before the step up arrives. Refinancing may involve discharge, application or valuation fees, and a new lender will reassess serviceability. Those costs need to be weighed against any saving.

The outcome is a clear plan. The officer knows the date the repayment rises, has a figure to budget for, and has a decision on whether to switch. Our investment loan refinancing team can run this comparison on your actual numbers.

How Does Your Deposit and LVR Affect Investor Borrowing?

The loan to value ratio (LVR) is your loan divided by the property value. Lenders and mortgage insurers generally expect lenders mortgage insurance (LMI) once the LVR goes above 80 per cent.

The 80 per cent mark is not a legal borrowing limit. It is where LMI is generally required, and each lender sets its own caps above it. LMI is a cost paid by the borrower, and the premium depends on the loan amount and LVR. Some lenders offer LMI waivers for certain occupations, but eligibility varies, so check the LMI waivers for paramedics page and ask about criteria before you assume you qualify.

Offset account balances do not reduce the loan amount for LVR purposes, so an offset helps with interest but will not change your LVR.

Using Equity to Grow Your Portfolio Without Breaking Your Tax Position

You may be able to use equity in an existing property as a deposit for the next purchase, subject to lender approval, a serviceability assessment and each lender's LVR limits. LMI may apply above 80 per cent LVR. The deductibility of interest depends on how the borrowed money is used.

Under ATO Taxation Ruling TR 2000/2, interest is assessed by how borrowed funds are used at each drawdown. If you draw equity for a holiday or a car, the interest on that part is not deductible, even though the loan is secured by an investment property. Keeping borrowings for investment purposes in separate loan splits makes the records clearer at tax time. The trade-off is that more debt means more risk if rents fall or rates rise. Our guides on equity release loans and debt recycling explain the options in more detail.

How Do the New Negative Gearing Rules Affect Your Loan Choices?

For established residential properties bought after 7:30pm AEST on 12 May 2026, net rental losses will only be deductible against other residential property income from the 2027-28 income year. Properties held at that time keep the current treatment.

This means a loss-making rental bought now may not reduce the tax on your wages from the 2027-28 income year, so you should check that the property can carry itself on its cash flow. Eligible new builds acquired after that date can continue to deduct losses against all income. Interest remains deductible, but the way a net loss is used has changed. The 50 per cent CGT discount also changes to indexation from 1 July 2027 for gains accruing after that date. These rules are detailed, so get advice from your accountant before you commit.

How Rental Income Is Counted When You Apply

Lenders generally count no more than 80 per cent of expected rent, because APRA's guidance expects an allowance of at least 20 per cent for periods without a tenant. Lenders also place less weight on a rental appraisal than on actual rent received.

This affects how much you can borrow. Every lender has its own rules on what rental evidence it accepts. Use our borrowing capacity calculator for an estimate, then have a broker check how different lenders treat your overtime, penalty rates and rent.

Planning a first purchase? Start with buying your first investment property.

Frequently Asked Questions