can i afford investment

Can I afford an investment property?

If you've finally built up some equity and are not sure whether you can afford an investment property, read on to calculate your costs.

So you've bought your first home and have been chipping away at the mortgage for a little while, and now your home has risen in value. You're feeling a bit more comfortable financially, and you're starting to wonder if you can afford an investment property.

Finding the answer to this question raises a number of interesting points that will help you decide if this approach is suitable for you.

What causes property prices to move up and down?

From a financial strategy perspective

The answer to whether you can afford something, whether it's a holiday, a car, a piece of designer furniture or a share portfolio, will very often come down to your priorities. While you could afford that overseas European vacation if you live on nothing but muesli and rice for the next six months, is that a sacrifice you're willing to make?

Deciding whether you can afford an investment property will, for many people, be a matter of first sorting out your priorities. You might have made a gain on the home you live in and you're pretty confident you can meet the mortgage repayments once you have a tenant renting your place, but if having a longer term financial strategy is not on your radar, then I'm sure you can find a lot of other ways you might prefer to spend your time and money.

Questions you must ask


All of these questions will help you formulate your strategy and lead you closer to the answer of whether you can afford the type of investment property that fits into your long-term plan.

From a practical perspective

It's always good to be practical. The more detailed information you have for any purchase, the better. So here's a list of the expenses you need to be aware of if you decide to become a property investor:

  • You are going to have to meet all the ordinary expenses of buying a property, such as stamp duty, bank fees and maybe mortgage lenders' insurance depending on the size of your deposit.
  • You should research the area where you're thinking of buying and find out what type of rental yield is realistic for the properties you are looking at and what type of tenants the area or quality of house will attract.
  • Remember there are other expenses to owning an investment property, including maintenance (the expected and the unexpected), insurance, council rates and water utility payments (landlords don't always have to pay for water, it's only compulsory in apartments where there's no unique meter system) and body corporate if it applies.
  • Work out what you will need to pay each week or month once you subtract the rental yield from your mortgage repayments and an apportionment of the related expenses (that is, TOTAL EXPENSES per month minus RENTAL INCOME for a month).
  • Ask yourself, does this weekly or monthly figure feel manageable. This is likely to vary depending on your personal risk profile.
  • Finally, ask yourself if you will feel comfortable if you can't find a tenant for one month, three months or six months? You can sometimes get landlord's insurance to cover unexpected vacancies, so this could be an option for your peace of mind.
Costs of investment property

From the bank's perspective

Once you've decided that an investment strategy is a great idea to advance your long-term financial plan and you feel you can afford your mortgage and expenses without it negatively affecting your lifestyle, you then have to figure out whether the bank thinks you can afford an investment property.

The best way to answer this question is to ask the bank. If one bank turns you down, don't forget to try another. You can also take a look at credit unions and smaller banks to get your loan.

Calculating your serviceability

Often the banks will use the word serviceability when talking about loan amounts. Use the calculator below to see how much you could potentially borrow.

Before you start

It is important to have a clear idea of your investment strategy before you start. Make sure you have done the following:

  • Work out your investment goals
  • Have a clear budget
  • Calculate your expected investment costs
  • Calculate your expected rental gains

Once you have a clear vision of where you want your investment strategy to go, knowing if you can afford it will become clear.

Start comparing investor loans

Rates last updated August 18th, 2018
$
Loan purpose
Offset account
Loan type
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Name Product Interest Rate (p.a.) Comp Rate^ (p.a.) Application Fee Ongoing Fees Max LVR Monthly Payment Short Description
3.89%
4.24%
$0
$0 p.a.
80%
Sharp interest only package rate
Fix your rate and minimise repayments for 2 years with this interest-only investor mortgage.
3.99%
3.99%
$0
$0 p.a.
80%
Special discounted interest rate
Get a discounted, low-fee investor loan from a convenient online lender. 20% deposit required.
3.98%
3.98%
$0
$0 p.a.
70%
Requires a 30% deposit
Investors can get a 100% offset account and a low rate if they have a big deposit. 100% online application process.
3.91%
3.92%
$0
$0 p.a.
80%
Add an offset account for $10 a month
Investors can go from application to approval in as little as 20 minutes with this innovative online lender.
3.97%
3.99%
$0
$0 p.a.
80%
Competitive investment package loan
Package your owner occupied loan with investment loan and receive a discounted investment rate. 100% offset account included.
4.09%
4.87%
$0
$395 p.a.
90%
10% deposit option available
Buy your investment property and set your repayments for the first year. Available in QLD, NSW and ACT only.
3.99%
5.17%
$600
$0 p.a.
90%
Available with a 10% deposit
Competitive rates for fixed for 3 years with redraw facility.
3.93%
3.94%
$0
$0 p.a.
80%
Competitive investor rate with plenty of features
This investment loan keeps fees low, has a sharp interest rate and comes with a 100% offset account.
3.99%
4.14%
$0
$0 p.a.
70%
Competitive investor mortgage for borrowers with a 30% deposit.
4.29%
4.31%
$0
$0 p.a.
80%
Flexible, low fee mortgage
Investors will pay no application or ongoing fees for this interest-only loan.
4.08%
4.09%
$0
$0 p.a.
90%
Low-fee investor mortgage with a partial offset account. 10% deposit option available.
4.18%
4.18%
$0
$0 p.a.
80%
Competitive investment mortgage
Investors get a 100% offset account and pay no application or ongoing fees on this loan from an innovative online lender.
3.99%
3.99%
$0
$0 p.a.
70%
Save on fees with this investor mortgage
Investors with a 30% deposit can get this low rate loan to fund their property portfolio.
4.29%
4.31%
$0
$0 p.a.
80%
Simple, flexible investment product
A simple, variable rate investor loan from an online lender that keeps fees to a minimum.
3.99%
4.62%
$395
$0 p.a.
80%
Flexible fixed investment loan
Investors can enjoy flexible repayments and an easy application process with this pioneering online lender.
4.24%
4.68%
$0
$0 p.a.
90%
Investor loan with a small deposit option
Fix your investment repayments for 1 year. You can get this loan with a 10% deposit. Available in QLD, NSW and ACT only.
4.13%
4.14%
$0
$0 p.a.
90%
Available with a 10% deposit
Access a fee-free offset account and a special interest rate for investors.
4.14%
3.96%
$0
$0 p.a.
80%
Low fee investor mortgage
Investors can go from application to full approval in as little as 20 minutes with this innovative online lender.
4.18%
4.19%
$0
$0 p.a.
80%
Line of credit for investors
Investors can easily access their equity using BPAY, a debit Master Card or cheque book with this interest-only line of credit.
4.31%
3.95%
$0
$0 p.a.
80%
Rapid online application process
A variable interest-only loan for investors. Fast application, low fees, optional offset account. 100% online lender.
4.14%
4.17%
$0
$0 p.a.
80%
Competitive rate for investors
Investors can enjoy flexible repayment options and pay no application or ongoing fees.
3.94%
3.92%
$0
$0 p.a.
80%
Add an offset account for $10 a month
Lock in your interest rate for 2 years and enjoy flexibility, an optional offset account and a fast online application process.
4.29%
4.27%
$0
$198 p.a.
70%
Lock in your investment rate for 3 years
Fund your property portfolio with this fixed rate mortgage which includes a 100% offset account. 30% deposit required.
3.84%
3.91%
$0
$0 p.a.
80%
Flexible low fee mortgage
Enjoy a fast application process and flexible repayment options with this fixed rate mortgage for investing.

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Credit services for Aussie Select, Aussie IQ and Aussie Optimizer products are provided by AHL Investments Pty Ltd ACN 105 265 861 Australian Credit Licence 246786 ("Aussie"), and its appointed credit representatives. Credit for Aussie Select products is provided by Residential Mortgage Group Pty Ltd ACN 152 378 133 Australian Credit Licence 414133 (“RMG”). RMG is a wholly-owned subsidiary of the Commonwealth Bank of Australia ABN 48 123 123 124 AFSL and Australian Credit Licence 234945. Credit for Aussie Optimizer products is provided by Perpetual Limited ABN 86 000 431 827 (Lender). Credit for Aussie IQ is provided by Macquarie Bank Limited ABN 46 008 583 542 AFSL and Australian Credit Licence 237502. Home loans issued by the Lender are serviced by Macquarie Securitisation Limited ABN 16 003 297 336, Australian Credit Licence 237863 (MSL).

Aussie is a trade mark of AHL Investments Pty Ltd. Aussie is a subsidiary of the Commonwealth Bank of Australia ABN 48 123 123 124. ©2018 AHL Investments Pty Ltd ABN 27 105 265 861 Australian Credit Licence 246786.

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Marc Terrano

Marc Terrano is a content marketer manager at finder. He's been writing and publishing personal finance content for over five years and loves to help Australians get a better deal.

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