Top tips to structure your investment loan in Point Cook

The way you structure your investment loan affects more than just your monthly repayment.

It influences how much tax you can claim, how much rental income you need to service the debt, and how much borrowing capacity you retain for your next property. A loan that works for someone holding one rental property in Point Cook with no plans to expand might not suit an investor building a portfolio across Melbourne's west.

When we talk about loan structure, we mean the combination of features you choose at the outset: interest-only or principal and interest repayments, variable or fixed interest rate, whether the loan sits in your name or a trust, and whether you split the loan across multiple accounts. Each of those decisions creates a different outcome when you go to lodge your tax return, apply for a second loan, or weather a few weeks without a tenant.

Interest-only or principal and interest repayments

An interest-only loan requires you to pay only the interest portion each month, leaving the principal balance unchanged. A principal and interest loan reduces the debt over time.

For an investor, interest-only repayments mean lower monthly outgoings, which can turn a negatively geared property into one that breaks even or delivers a small surplus each month. That surplus matters when rental income is your primary source of serviceability for a second loan. Consider an investor who bought a three-bedroom townhouse near Saltwater Coast, with rent covering most but not all of the holding costs. Switching from principal and interest to interest-only repayments freed up around $400 a month, enough to cover the body corporate levy and leave a buffer for vacancy. The investor applied for a second loan 18 months later and qualified based on the rental income from the first property, which would not have been the case under the higher principal and interest repayment.

Interest-only terms are typically offered for five years on investment loans, after which the loan reverts to principal and interest unless you apply to extend the interest-only period. Lenders assess extensions on a case-by-case basis and generally require the property to have performed well and your serviceability to remain strong. If you plan to sell or refinance before the interest-only term expires, the reversion may not affect you. If you plan to hold the property long term, factor in the repayment increase when the loan converts.

Variable or fixed interest rate

A variable rate moves in line with lender pricing decisions, which usually follow broader rate movements set by the Reserve Bank. A fixed rate locks in your interest cost for a set period, typically one to five years.

Variable rates on investment loans tend to sit slightly higher than owner-occupier variable rates, reflecting the higher capital cost to the lender under APRA's prudential standards. Fixed rates depend on wholesale funding costs at the time you lock in and may be higher or lower than the variable rate on offer. The main advantage of a variable rate is flexibility: you can make extra repayments, redraw those funds, and switch lenders without paying break costs. The main advantage of a fixed rate is certainty over your holding costs, which can help with budgeting if rental income is tight or you expect rates to rise.

In our experience, investors holding multiple properties often fix a portion of the loan and leave the rest variable. That approach gives you some protection against rate increases while preserving the flexibility to make lump sum repayments or refinance part of the debt without triggering penalties.

Splitting your loan across multiple accounts

A split loan divides your total borrowing into two or more separate accounts, each with its own rate type, repayment structure and features.

You might fix $300,000 at a rate of 6.2 per cent for three years on an interest-only basis, and leave the remaining $200,000 on a variable rate with an offset account attached. That structure lets you lock in certainty on the majority of the debt while keeping a variable portion you can pay down or redraw from as your circumstances change. Splits are common among investors in Point Cook who plan to use equity from their rental property to fund a deposit on a second purchase. The variable portion can be paid down quickly using savings or bonuses, building usable equity without incurring break costs, while the larger fixed portion keeps monthly repayments predictable.

Some lenders charge a small annual fee per split, typically $10 to $20 per account. Others include splits at no additional cost. The number of splits allowed varies by lender, with most offering up to five or six.

Offset accounts and their tax treatment

An offset account is a transaction account linked to your loan. The balance in the offset account reduces the interest charged on the loan without reducing the loan balance itself.

For investment loans, offset accounts need to be handled carefully. Interest on borrowings used to acquire or hold a rental property is deductible against rental income. If you deposit non-investment funds, such as your salary, into an offset account linked to an investment loan, you reduce the amount of deductible interest you pay. That is not a problem if you have surplus cash and want to minimise interest costs, but it can work against you if you are trying to maximise tax deductions while holding cash for another purpose.

A common structure is to keep the investment loan separate from your owner-occupier loan, with no offset attached to the investment loan, so that every dollar of interest remains deductible. If you do want an offset on an investment loan, use it only for funds related to that investment, such as rental income or savings earmarked for property expenses, rather than your regular salary.

Loan structure and borrowing capacity for a second property

When you apply for a second investment loan, lenders assess your ability to service both the existing loan and the new one. The rental income from your first property is included in that assessment, but lenders apply a discount to account for vacancy and holding costs.

Most lenders assume a vacancy rate of around 5 per cent, meaning they will count only 95 per cent of the weekly rent when calculating your income. Some lenders reduce rental income further, to 80 per cent, to allow for property management fees, rates, insurance and maintenance. If your first property is on interest-only repayments with a low monthly cost, more of the rental income flows through as surplus, which increases your borrowing capacity for the second loan. If the first property is on principal and interest repayments, the higher monthly cost reduces your surplus and may limit how much you can borrow.

Consider an investor who purchased a townhouse near Point Cook Town Centre. Rent was $550 a week, or around $28,600 a year. After applying the 80 per cent discount, the lender counted $22,880 as assessable rental income. The loan repayment on an interest-only basis was $2,100 a month, or $25,200 a year. The investor showed a rental shortfall of around $2,300 a year, which the lender added to their total debt position. Because the shortfall was small and the investor had a stable income from employment, they were approved for a second loan to purchase in Tarneit. Had the first loan been structured on a principal and interest basis, the annual repayment would have been closer to $36,000, creating a shortfall of over $13,000 and reducing the amount they could borrow.

Trust structures and entity selection

Some investors hold rental property in a discretionary trust or a company rather than in their own name. The decision is usually driven by asset protection, tax planning or succession considerations and should be discussed with an accountant before proceeding.

From a lending perspective, loans to trusts and companies are generally priced the same as loans to individuals, provided the loan is for residential investment purposes and the trust or company is not borrowing predominantly for business purposes. You will usually be required to provide a personal guarantee, which means you remain liable for the debt even though the property is held by the entity. Some lenders offer slightly fewer features or higher interest rates for loans to non-individual borrowers, so it is worth comparing your investment loan options carefully if you are using a trust or company structure.

Loan features that support portfolio growth

Certain loan features become more valuable as you move from one property to two or three.

Portability allows you to transfer your loan from one security property to another without refinancing. That feature is useful if you sell your first investment property and want to use the same loan to purchase a replacement property without paying discharge or application fees. Redraw facilities let you access extra repayments you have made on a variable loan, which can be useful if you need to cover a shortfall during a vacancy period or fund minor repairs. Some lenders restrict redraw on investment loans or charge a fee per withdrawal, so check the terms before relying on redraw as part of your cash flow planning.

Additional repayments are allowed on most variable rate investment loans, but be mindful of the tax implications. Paying down an investment loan faster than required reduces your deductible interest, which may not align with your tax strategy if you are in a high marginal tax bracket. If you have both an owner-occupier loan and an investment loan, paying extra on the owner-occupier loan usually makes more sense, as the interest on that loan is not deductible.

How legislated changes from mid-2026 affect loan structuring decisions

If you acquired an established investment property in Point Cook after 12 May 2026, losses from that property, including interest costs, can only be offset against income from other residential properties from the 2027-28 income year onward. If you hold a property purchased before that date, or if you bought a qualifying new build, the existing negative gearing treatment continues.

For investors affected by the change, loan structure becomes more important. Interest-only repayments still reduce your monthly cash outflow, but the tax benefit of the interest deduction is limited unless you have other rental income to offset it against. That may influence whether you choose to buy a second property sooner, to create rental income that can absorb the losses from the first, or whether you focus on properties with higher rental yields that generate a surplus rather than a loss.

Capital gains on investment properties sold after 1 July 2027 are taxed under a mixed regime: gains accruing before that date are subject to the existing 50 per cent discount, and gains accruing after that date are indexed to inflation with a 30 per cent minimum tax rate. For investors planning to hold property long term, the change may support a longer hold period, as indexation can reduce the taxable gain compared to the flat 50 per cent discount in a high-inflation environment. For investors planning to sell within a few years, the change has limited impact. Neither scenario changes the importance of structuring your loan to support serviceability and portfolio growth in the years before you sell.

Call one of our team or book an appointment at a time that works for you. We will walk through your current position, your plans for the next property, and the loan structure that fits both.

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