Common Mistakes Buying an Investment Unit in Chermside

Chermside is home to Westfield Chermside and The Prince Charles Hospital, so it is natural to look closely at units near them. The loan structure is an important part of any unit purchase, and before you fall for a floor plan, it pays to understand how a lender will view you.

This guide covers the areas where we often see first-time investors caught short. Our aim is to help you walk into your investment loan conversation feeling prepared and supported.

Why Does Borrowing Capacity Surprise Investment Unit Buyers?

Lenders assess your ability to repay at a rate at least 3 percentage points above the actual loan rate, and they count only part of the expected rent. This means your borrowing capacity is often lower than a quick online estimate suggests.

That 3 percentage point buffer applies to banks and other authorised deposit-taking institutions. APRA's view is that prudent lenders count no more than 80 per cent of expected rent, to allow for gaps between tenants. Lenders also tend to place less weight on a rental appraisal than on actual rent received.

Using our illustrative rate of 6.75% p.a., a lender would test your repayments at 9.75% p.a. Your existing debts, including credit card limits, also reduce what you can borrow. A good first step is to check your borrowing capacity before you start inspecting units.

Interest Only or Principal and Interest: What Changes at 6.75%

Interest only keeps early repayments lower, but it does not reduce your loan balance and does not increase how much you can borrow. Principal and interest repayments cost more each month, but they pay the loan down from day one.

Consider an investor who borrows $500,000 for a unit, using an illustrative rate of 6.75% p.a. for every figure below.

• Interest only costs about $2,813 a month.
• Principal and interest over 30 years costs about $3,243 a month.
• Five years of interest only, followed by principal and interest, costs about $3,454 a month for the remaining 25 years.

The lower early repayment is attractive, but the balance is still $500,000 after five years. The repayment then rises by roughly $211 a month compared with a loan that started on principal and interest. Lenders also assess an interest-only loan using the shorter remaining term, so it does not stretch your borrowing power.

In a scenario like this, the investor chooses interest only for the first few years while the unit settles in with a tenant. They also set aside the repayment difference each month. When the loan switches to principal and interest, the higher repayment is already part of their budget. The trade-off is that they carry the full debt for longer. You can test your own numbers with a repayment calculator, and we can walk you through the results.

Is 80% LVR the Limit for an Investor Deposit?

No. The 80 per cent loan-to-value ratio (LVR) is the point above which Lenders Mortgage Insurance (LMI) is generally required, not a legal borrowing cap. Each lender sets its own policy above 80 per cent.

Borrowing above 80 per cent needs approval from both the lender and the mortgage insurer. The LMI premium is paid by you, and it adds to your upfront cost. For some investors a larger investor deposit avoids that cost. Others decide that buying sooner is worth paying it.

If you own a home, you may be able to use its equity towards your deposit. This increases your total debt, and you will be repaying more across both properties. Interest deductibility depends on how the borrowed money is used, so the funds should go towards the investment purchase and not private spending. A refinancing review can show whether this suits your situation.

Negative Gearing Rules Have Changed for New Purchases

For an established unit bought after 7:30pm AEST on 12 May 2026, a net rental loss can still be deducted against other income under the current rules until 30 June 2027. From the 2027-28 income year, it can only be used against residential property income, including residential capital gains, and excess losses carry forward.

Properties held at that time keep the earlier treatment. So do eligible new builds, which include dwellings built on vacant land or replacing a building where the number of dwellings increases. Units bought between that date and 30 June 2027 can use the current rules until 30 June 2027 only.

Capital gains tax is also changing. From 1 July 2027, the 50 per cent discount is replaced by cost base indexation and a 30 per cent minimum tax rate on real gains accruing from that date. Investors who already hold property are taxed under both sets of rules when they sell. Tax outcomes depend on your personal circumstances, so speak with your accountant before you buy.

Body Corporate Fees and Other Holding Costs in Your Budget

Unit owners pay body corporate levies on top of the loan, and these should be part of your cash flow plan before you make an offer. They are an ongoing cost whether or not the unit is rented.

Interest on money borrowed to buy a rental property is generally deductible while the property is rented or available for rent. Only the interest part of a repayment is deductible, not the principal. Council rates, insurance, property management fees, repairs and depreciation are also deductible for the period the unit is rented or genuinely available for rent. Ask your accountant how body corporate costs apply to your unit.

A unit that looks affordable on the loan alone can feel tight once every holding cost is included. Mapping these costs early helps you decide how much cash buffer to keep, especially if the unit sits vacant for a while.

Putting these pieces together before your investment loan application makes the process calmer and the outcome clearer. If you live in or near Chermside, our local mortgage broker in Chermside team would love to help you plan your first investment unit. Call one of our team or book an appointment at a time that works for you.

Frequently Asked Questions