To get an investment loan approved, you need to show three things: steady income you can prove, a deposit or equity of at least 10% to 20% plus costs, and enough surplus to keep paying if rates rise 3 percentage points. Lenders test that last point at your rate plus APRA’s 3% buffer, so a 6.89% investor rate is assessed at about 9.89%. Use this checklist to get your documents, numbers and lender choice right before you apply.
Documents you’ll need
| Category | Employees (PAYG) | Self-employed |
|---|---|---|
| Identity | Driver’s licence or passport | Driver’s licence or passport |
| Income | Two recent payslips, latest payment summary or tax return, sometimes an employment letter | Two years of personal and business tax returns and notices of assessment, or accountant-prepared financials |
| Savings and deposit | Three months of account statements showing your deposit | Three months of account statements showing your deposit |
| Existing loans | Statements for home loans, car loans and personal loans | Statements for all loans, including business debts you’ve guaranteed |
| Credit cards | Statements showing limits (lenders count the limit, not the balance) | Same |
| Rental income | Rental appraisal for the new property; lease or rental statements for properties you own | Same |
| The purchase | Signed contract of sale | Signed contract of sale |
If you’re self-employed with less than two years of tax returns, some lenders accept alternative documents. See low doc home loans.
1. Check your borrowing capacity first
Before you look at properties, find out how much you can borrow. Lenders work it out from your income, living expenses, existing debts and the new loan, all tested at a higher rate:
- Serviceability buffer. APRA expects lenders to assess loans at least 3 percentage points above the actual rate.
- Existing loans. Your current home loan is usually assessed at a buffered rate too, not your actual repayment.
- Credit cards. Lenders typically count about 3% to 3.8% of the card limit as a monthly expense, even if you pay it off in full.
- Debt-to-income. APRA limits how much new lending banks can do at six times income or more, so high-debt applications can be harder to place.
2. Know how lenders count rental income
Lenders don’t count all of the rent. Most “shade” it to allow for vacancies and costs, typically counting 70% to 80% of the gross rent. Some lenders also cap the rent they accept from properties with unusual features or in certain postcodes. Policy differs enough that the same application can be approved by one lender and declined by another. See how lenders assess investment loans.
3. Sort out your deposit
Most lenders want a 20% deposit for an investment property to avoid lenders mortgage insurance, plus money for stamp duty and other costs. Some lend up to 90% or 95% with LMI. If you own a home, you may be able to use its equity instead of cash, through a separate loan secured by your home. Government deposit schemes such as the First Home Guarantee are for owner-occupiers only.
4. Choose the loan and the structure
Decide on interest-only or principal and interest, fixed or variable, and whether you need an offset before you apply, because they affect both the rate and your borrowing capacity. Keep each property on its own loan and avoid cross-securing. If this is your first investment, get the structure right now; it’s harder to change later.
5. Prepare for the valuation
The lender values the property, and its valuation, not the price you pay, sets your LVR. If the valuation comes in low, you’ll need more deposit or a higher LVR. Check recent comparable sales before you sign, and consider making your contract subject to finance.
6. Clean up your credit before applying
- Pay down or close credit cards you don’t use, and reduce limits on the ones you keep.
- Avoid new loans, buy now pay later accounts or credit applications in the months before you apply.
- Check your credit report for errors; you can get a free copy from the credit reporting bodies.
- Keep your account statements clean of overdrawn balances and missed payments.
Why applications get declined
- Not enough surplus income once the 3% buffer, shaded rent and all debts are counted.
- Living expenses higher than declared, or unexplained spending in statements.
- Recent credit enquiries, defaults or missed repayments.
- A property the lender won’t accept at your LVR, such as a small unit or a property in a restricted postcode.
- Unstable income: a new job still on probation, or self-employment income that has fallen.
A mortgage broker can match your application to a lender whose policy suits it before you apply, which avoids extra credit enquiries.
Frequently asked questions
What documents do I need for an investment loan?
Usually proof of identity, recent payslips or two years of tax returns if self-employed, three months of bank statements, statements for your existing loans and credit cards, a rental appraisal for the new property and the signed contract of sale. Lenders may ask for more depending on your situation.
How do lenders count rental income?
Most count only part of it, typically 70% to 80% of the gross rent, to allow for vacancies, management and maintenance. They use a rental appraisal for a new purchase and leases or statements for properties you already own. The exact percentage varies by lender and property type.
Why do investment loan applications get declined?
The most common reasons are not enough surplus income once the 3% serviceability buffer and all your debts are included, higher spending than declared, recent credit problems or enquiries, and a property the lender won’t accept at your LVR. A broker can help match your application to the right lender.
Sources
- APRA, Macroprudential policy settings, May 2026
- Canstar, Average home loan interest rates, as at 2 October 2026
- ASIC Moneysmart, Choosing a home loan
General information only. It does not consider your objectives, financial situation or needs and is not credit, tax or financial advice.