Buying your first investment property in Perth is an exciting step, and it can feel a little daunting when you start looking at the lending side of things. The good news is that the core ideas are not complicated once someone explains them in plain English. This guide walks through how investment loans work, the language lenders use, and the practical levers that decide what you can borrow.
A quick note before we begin. Licensed mortgage brokers compare products from more than 100 lenders and provide the actual credit advice. This site does not provide credit advice. When you are ready, speak with a Perth broker who can tailor the options to your situation.
How investment loans differ from owner-occupier loans
When you buy the home you live in, that is your PPOR (principal place of residence, your own home). A loan against it is an owner-occupier loan. An investment loan, by contrast, funds a property you intend to rent out rather than live in.
Lenders treat the two differently. Because an investment property carries a slightly different risk profile, investment loans often come with a marginally higher interest rate than owner-occupier loans. Lenders also assess the deal differently, because they will count expected rental income on one side of the ledger and the new repayments on the other.
The features can look similar (offset accounts, redraw, fixed or variable rates), but the assessment, pricing and serviceability rules differ enough that it pays to have an accredited broker compare lenders rather than assuming your current bank offers the best fit. If you are still getting your head around the basics of borrowing, our guide to how much you can borrow for a home loan in Perth is a useful companion read.
Interest-only versus principal-and-interest
Two common repayment structures come up constantly in investment lending.
With P&I (principal and interest), each repayment chips away at both the interest charged and the loan balance itself, so the debt shrinks over time.
With IO (interest-only, repayments that cover only interest and do not reduce the loan balance), your repayments are lower because you are not paying down the loan during the interest-only period. That period is typically a set number of years, after which the loan reverts to P&I and repayments step up.
Why some investors choose interest-only
Investors sometimes favour interest-only repayments on an investment loan to keep their outgoings lower in the early years, particularly while they hold a separate loan on their own home. It can also have tax implications, which we touch on below. There is a trade-off, though. Because the balance is not reducing, you build equity in that property more slowly, and repayments jump once the interest-only window ends. Whether IO or P&I suits you depends on your goals, your cash flow and your overall position, which is exactly the kind of thing a broker will model with you.
Using equity in your existing home as a deposit
One of the most common ways Australians fund a first investment property is by tapping the equity (the share of a property you own) in their existing home.
Equity is simply the current value of your property minus what you still owe on it. If your Perth home has grown in value, or you have paid down a chunk of the loan, you may have usable equity that a lender will let you borrow against, often instead of saving a fresh cash deposit.
In practice, a lender will not let you use every dollar of equity. They typically lend up to a set percentage of the home’s value, and the amount they release becomes the deposit (and often the purchase costs) for the investment property. This is a powerful idea because it can let you buy without draining your savings, but it does mean you are increasing the total debt secured against your assets. A broker can explain the structure, the risks and whether your equity position stacks up. You can learn more about the loan options we help with on our home loans and investment loans service pages.
LVR and LMI on investment loans
LVR (loan-to-value ratio) is the size of your loan expressed as a percentage of the property’s value. Borrow a smaller share of the value and your LVR is lower, which lenders generally view as less risky.
LMI (lenders mortgage insurance, payable above 80% of property value) comes into play when your LVR sits above that 80% threshold. LMI is a one-off cost that protects the lender, not you, if the loan ever goes into default. It can sometimes be added to the loan rather than paid upfront.
On investment loans, the same broad principle applies. Keep your LVR at or below 80% and you can usually sidestep LMI. Using equity from your existing home can help here, because a larger effective deposit pushes your LVR down. Every lender sets its own appetite and pricing, so this is another area where comparing across a panel of lenders matters.
Debt-to-income and serviceability
DTI (debt-to-income ratio) compares your total debts against your total income. Lenders look at it to gauge how much overall debt you are carrying relative to what you earn, and many have caps on the DTI they will accept.
For an investment purchase this is important, because the new loan adds to your existing commitments. Lenders will, however, count a portion of the expected rental income when working out whether you can comfortably service the loan. They also apply a buffer, assessing your repayments at a rate higher than the actual rate, to make sure you could still cope if rates rose. Pulling these threads together (income, existing debts, rental income and the buffer) is the heart of a serviceability assessment, and it is where a good broker earns their keep.
Rentvesting: a Perth-friendly strategy
Rentvesting is a strategy where you rent the home you actually want to live in, while buying an investment property somewhere that suits your budget.
For many Perth buyers this opens up options. You might love a particular suburb that is out of reach to buy in today, so you rent there and invest in a more affordable area where the numbers work better. It lets you enter the property market sooner without compromising on lifestyle, and your tenant helps cover the investment loan.
Rentvesting is not for everyone, and it changes how some grants and concessions apply, since you are not buying a home to live in. If you are weighing up your first purchase, it is worth reading our WA first home buyer grants and schemes guide alongside this one, because eligibility rules differ between owner-occupiers and investors.
How rental income and tax are assessed
Two questions come up almost immediately: how does the rent factor in, and what about tax?
On the lending side, a lender will count a share of the expected rental income when assessing your application. They usually do not count all of it, because they allow for vacancy periods and running costs, so the figure they use is more conservative than the headline rent.
On the tax side, things like negative gearing (where the costs of holding a property exceed the income it produces) and depreciation can affect your overall position. These rules are genuinely individual, they change, and getting them wrong is costly. We will not give tax advice or quote figures here. Please speak with a registered tax agent or accountant, and refer to the Australian Taxation Office (the ATO) at ato.gov.au for the current rules. Your accountant and your broker often work well together, one on the tax structure and the other on the lending.
Bringing it together
An investment property loan in Perth comes down to a handful of moving parts: the loan type and repayment structure, your deposit (whether cash or equity), your LVR and any LMI, your DTI and serviceability, and how rental income is counted. None of these are beyond a beginner, especially with the right people in your corner.
The most useful next step is a conversation with an accredited broker who can look at your real numbers and compare lenders for you. We can get you matched with a Perth broker from independent brokers at no cost to you. When you are ready, reach out via our contact page and we will take it from there.
Last updated 2026-06-26.
This information is general in nature and does not take into account your personal circumstances, objectives or needs. It is not financial or credit advice. Figures are current as at June 2026 and may change. Seek independent advice before acting. Perth Home Loan Broker is an enquiry website; licensed mortgage brokers provide all credit advice under the National Consumer Credit Protection Act 2009.