Shopping around for an investment loan is meant to save you money, but most investors in Erina end up comparing products on rate first and everything else second.
That approach made sense when the only real difference between lenders was a few basis points. Now, with federal tax changes kicking in mid-2027 and APRA's debt-to-income caps already in force, the features buried in your loan contract matter more than the advertised rate. Picking the wrong structure can lock you out of future borrowing or leave you holding a property you can't afford to keep when the rules change.
Ignoring Loan to Value Limits When You Want to Build a Portfolio
Most lenders cap investor loans at 90 per cent LVR, but the real constraint shows up when you go back for a second property. Some lenders treat your total investor debt differently once you cross two or three properties, either lifting serviceability buffers or capping how much equity you can pull from your existing holdings. A borrower with two properties in Terrigal and Erina Heights might find one lender will release equity at 80 per cent combined LVR while another won't go past 70 per cent once you hold more than one investment.
If you're planning to add a second or third property down the track, the lender's portfolio policy matters more than the rate on your first loan. We regularly see investors refinance within 18 months because the lender they picked for loan one won't fund loan two without selling something first.
Choosing Interest Only Without Checking the Revert Rate
Interest only periods on investment loans usually run five years, and the rate during that period gets most of the attention. The rate you revert to after year five often doesn't. One lender might offer 6.10 per cent interest only and revert to 6.35 per cent principal and interest. Another offers 6.15 per cent interest only but reverts to 6.70 per cent. Over a 30 year term, that back-end difference can cost you more than the upfront saving, especially if you don't refinance before the revert hits.
Consider a buyer who borrowed against a unit near Erina Fair. The interest only rate looked sharp, but the loan didn't allow any further redraws once the principal and interest period started, and the revert rate sat 60 basis points above the market. When they wanted to pull equity two years later to buy in Gosford, they had to refinance the whole book just to access the equity, which triggered break costs on a partial fixed rate and pushed settlement out by three weeks.
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Overlooking Offset and Redraw Restrictions on Investor Products
Not all investor loans come with offset accounts, and the ones that do sometimes limit how many accounts you can link or cap the balance that actually offsets. A lender might advertise full offset but restrict it to one property per customer or limit the offset benefit to 80 per cent of the loan balance. Redraw facilities can be even more restrictive, with some lenders freezing redraws once your LVR rises above 80 per cent or if you've missed a single repayment in the past 12 months.
If you're holding cash in an offset to cover vacancy periods or body corporate levies, you need to know exactly how much of that balance is working for you. A borrower holding $40,000 in offset might assume it's reducing interest on the full loan amount, but if the lender caps offset at $30,000, the remaining $10,000 is earning nothing while the loan interest keeps accruing.
Picking a Loan That Doesn't Fit the New Negative Gearing Rules
From 1 July 2027, rental losses on established properties bought after 12 May 2026 can't be offset against your salary anymore. Those losses get quarantined and can only be used against future rental income or capital gains on residential property. If you're buying an established property in Erina or East Gosford and expecting to negatively gear it the old way, your loan structure needs to account for the fact that you won't get that tax refund anymore.
That changes how much you can borrow under the serviceability test, and it changes whether interest only or principal and interest makes sense. Some investors are now looking at new builds specifically to keep access to traditional negative gearing, but a new build in Erina doesn't always deliver the same capital growth as an established property closer to the water or the M1. The loan you pick today should give you room to move if your tax position shifts or if you want to refinance in a few years without penalty.
Skipping the Comparison Between Principal and Interest and Interest Only Repayments
Interest only keeps your repayments lower in the short term, which helps with cash flow if you're managing vacancy risk or funding renovations. Principal and interest builds equity faster and gives you more borrowing headroom when you go back to the bank for another loan. The choice depends on whether you're prioritising cash flow now or portfolio growth later, and that depends on where you are in your investment timeline.
An investor buying a second property in Erina might choose principal and interest on the first loan to build equity quickly, then use that equity to fund the deposit on the second property with interest only. Another investor closer to retirement might want interest only on everything to keep repayments low and maximise franking credit offsets. Your broker should be walking you through both scenarios with actual repayment figures and showing you what each structure does to your borrowing capacity over five and ten years, not just handing you the lowest rate and calling it done.
The other piece that gets missed is how lenders calculate rental income. Some lenders take 80 per cent of the rental income and add it to your serviceability. Others take 100 per cent but apply a higher vacancy rate buffer. If you're comparing two loans with similar rates but different rental income treatments, the one that uses 100 per cent of the rent might let you borrow $50,000 more, and that could be the difference between buying in Erina or settling for somewhere further out.
Call one of our team or book an appointment at a time that works for you. We'll pull together a proper comparison that includes the rate, the LVR policy, the offset terms, and how each lender treats rental income and portfolio lending, so you're not stuck refinancing in 18 months because the loan you picked doesn't do what you need it to.
Frequently Asked Questions
What LVR do most lenders allow for investment property loans?
Most lenders cap investment loans at 90 per cent LVR, but portfolio lending policies often tighten once you hold two or more properties. Some lenders reduce the maximum LVR to 80 per cent or limit how much equity you can access across multiple properties.
How do the new negative gearing rules affect investment loan serviceability?
From 1 July 2027, rental losses on established properties purchased after 12 May 2026 are quarantined and cannot be offset against salary or wages. This reduces your after-tax income in the eyes of the lender and can lower how much you can borrow under the serviceability test.
Should I choose interest only or principal and interest for an investment loan?
Interest only keeps repayments lower and improves short-term cash flow, which suits investors managing vacancy risk or planning to buy again soon. Principal and interest builds equity faster and increases your borrowing capacity for future purchases.
Do all investment loans come with offset accounts?
No. Some lenders do not offer offset accounts on investor loans, and others cap the balance that qualifies for offset or limit the number of properties you can link. Always confirm offset terms before you apply.
What is a revert rate on an interest only loan?
The revert rate is the interest rate your loan switches to once the interest only period ends, usually after five years. This rate is often higher than the initial interest only rate and can vary significantly between lenders.
