Borrowing Capacity

How Much Can I Borrow for an Investment Property Loan?

If you’re looking to expand your property portfolio, understanding your borrowing capacity is essential. Our Investment Property Loan Borrowing Power Calculator takes the guesswork out of the equation, giving you a quick estimate of how much you could borrow based on your income, existing financial commitments, and current lending conditions.

This tool can also help you gauge potential loan repayments, ensuring you structure your investment strategy in a way that aligns with your financial goals. Keep in mind, the results are an estimate only—consult with your mortgage broker or financial adviser to explore tailored financing options.

How Much Should You Borrow?

Lenders may offer you a loan amount that exceeds your initial expectations, but should you borrow at the top of your capacity? While accessing higher leverage may boost your investment potential, it’s crucial to ensure your loan repayments align with your long-term strategy.

A good rule of thumb is to keep mortgage repayments within a sustainable percentage of your rental income and overall portfolio cash flow. If your loan repayments exceed 30% of your rental income, you could face cash flow stress, which may limit your ability to reinvest, cover unexpected costs, or manage interest rate fluctuations.

Banks also apply a serviceability buffer, typically 3% above the current interest rate, to stress-test your financial position. This ensures you can continue servicing the loan even if rates rise—an essential consideration for investors planning to hold properties long-term.

What to Do If Your Borrowing Power Isn’t High Enough

If your borrowing capacity falls short of your investment goals, consider these strategies to improve your position:

1. Reduce Your Expenses

Lenders assess your financial health using the Household Expenditure Measure (HEM) and your actual spending habits. If your discretionary expenses are high, reducing unnecessary costs—such as subscriptions, lifestyle spending, or personal loan repayments—can improve your borrowing capacity.

For investors, structuring existing debts efficiently, such as consolidating loans or refinancing under better terms, can also enhance serviceability.

2. Increase Your Income

Higher income translates to increased borrowing power. Investors can explore options such as:

Increasing rental income by upgrading existing properties, adding granny flats, or short-term letting
Generating additional income streams, such as side businesses or consultancy work
Partnering with co-investors to pool income and strengthen loan applications

3. Choose the Right Investment Property

If your borrowing capacity doesn’t support your initial property choice, consider alternative investments:

Dual-income properties (e.g., duplexes, dual occupancy, co-living and adding granny flats) to boost rental returns
Regional markets offering strong growth and rental yield potential
Off-the-plan investments that allow time to grow your deposit before settlement

Rather than maxing out your borrowing power on a single property, a strategic approach—focusing on cash flow and capital growth—may be more beneficial.

4. Use a Guarantor

A guarantor loan, typically backed by a family member’s equity, can help investors increase borrowing capacity without needing a larger deposit. However, this strategy carries risks, so it’s essential to assess the long-term impact on both parties.

5. Shop Around for the Best Lender

Not all lenders assess borrowing capacity the same way. Some may offer more flexibility, particularly for investors with multiple properties or alternative income sources. A mortgage broker specializing in investment lending can help identify lenders who align with your financial strategy.

Maximizing Your Investment Potential

Your borrowing power is more than just a loan amount—it’s the key to unlocking wealth through property investment. By managing expenses, increasing income, selecting the right properties, and structuring your finances strategically, you can optimize your portfolio for long-term success.