Investment Financing

Financing investment properties differs from primary residence loans. Banks typically require higher deposits and charge higher interest rates for investment properties.

1. Deposit Requirements

2. Interest Rates

Investment property loans typically have interest rates 0.5-1.5% higher than primary residence loans. This is because banks consider investment properties higher risk.

3. Affordability Assessment

Banks will assess your ability to service multiple bonds. They typically:

• Consider your total debt-to-income ratio across all properties
• May require proof of rental income from existing properties
• Stress test your ability to pay if rental income drops by 20-30%
• Require strong credit history and stable income

4. Leveraging Strategy

Using borrowed money (leverage) can amplify returns but also increases risk. If property values increase, your percentage return on your own capital is much higher. However, if values decrease, losses are also magnified.