Do You Know How Investment Property Loans Work in Kooyong?

Understanding Investment Property Finance for Kooyong Buyers

Buying an investment house in Kooyong means approaching finance differently than you would for a home you plan to live in. Lenders assess investment loans with a tighter serviceability calculation, and the tax treatment of rental income and expenses has changed significantly under new legislation that takes effect from mid-2027.

Kooyong's appeal to investors has historically centred on its proximity to Glenferrie Road retail and dining, excellent school zones including Scotch College and Methodist Ladies' College, and solid long-term capital growth driven by tightly held housing stock and a high owner-occupier demographic. Most properties in the suburb are family homes on large blocks, with a lower proportion of units compared to nearby suburbs like Malvern or Armadale. This means rental yields tend to sit below three per cent, but capital appreciation has been reliable over longer holding periods.

The shift in how lenders and the ATO treat investment property finance means preparing before you make an offer, not after you sign a contract. Borrowing capacity, deposit structure, and tax planning now need to be considered together rather than sequentially.

What Lenders Assess When You Apply for an Investment Loan

Lenders calculate serviceability by adding rental income at 80 per cent of the assessed market rent, then deducting loan repayments calculated at a buffered rate three percentage points above the actual product rate. They also apply the debt-to-income cap introduced in February, which limits how many loans a lender can write above six times gross income. For an investor earning $150,000 annually, total lending across all mortgages would be capped at $900,000 under the DTI measure if your application falls within that 20 per cent allocation.

The 80 per cent rental income adjustment accounts for vacancy periods, maintenance downtime, and property management fees. If a Kooyong property near Kooyong Village rents for $900 per week, lenders will assess your income at $720 per week. That $180 reduction compounds across the life of the loan in the serviceability test, and it can reduce your maximum borrowing by $40,000 to $60,000 compared to a scenario where full rent was included.

Consider a buyer purchasing a three-bedroom period home in Kooyong with the intention of renting it to a family while holding for long-term growth. Rental income is assessed conservatively, but existing income from salary or business supports most of the borrowing. The lender will also factor in body corporate fees if the property is on a shared title, council rates, insurance, and an interest buffer. Because Kooyong properties often sit on larger allotments with higher land values, council rates and insurance premiums can be above the metro average, and those costs are deducted before serviceability is approved.

Deposit and Equity Structures for Investors

Most lenders require a 20 per cent deposit for investment property to avoid Lenders Mortgage Insurance. That means you need genuine savings, equity from an existing property, or a combination of both. If you own a home in a nearby suburb such as Glen Iris or Malvern, you may be able to release equity and use it as a deposit without selling, provided your total loan to value ratio across all properties stays within the lender's policy.

Using equity rather than cash preserves liquidity and allows you to retain savings for settlement costs, which include stamp duty, conveyancing, building and pest inspections, and lender fees. Stamp duty on investment property in Victoria does not attract the concessions available to owner-occupiers, so a property purchased at the current median in Kooyong will incur duty in the range of five per cent of the purchase price.

If your deposit is below 20 per cent, LMI becomes payable and is calculated as a percentage of the loan amount above 80 per cent LVR. That premium can be capitalised into the loan, but it increases your total borrowing and your ongoing repayments. Some lenders will allow 90 per cent LVR for investment lending if you have a strong income and credit profile, but serviceability becomes much tighter once you move beyond 80 per cent.

Interest Rate Structure and Repayment Type

You can structure an investment loan as variable, fixed, or a combination of both. Variable rates allow you to make additional repayments without penalty and provide access to offset accounts, which can be useful if you plan to hold surplus cash or if rental income fluctuates. Fixed rates provide certainty for a set period, typically between one and five years, but limit your ability to pay down the loan early and usually do not offer offset functionality.

Interest-only repayments are a common choice for investors because they reduce the monthly commitment and allow you to direct surplus cash toward other investments or offset the loan on your own home if that carries a higher balance. Lenders will approve interest-only periods for up to five years initially, with the option to extend depending on your circumstances when the period expires. After the interest-only term ends, the loan reverts to principal and interest unless you apply for a further extension.

In our experience, buyers who select interest-only for the investment loan but maintain principal and interest on their owner-occupied mortgage tend to build wealth more efficiently, because they are paying down non-deductible debt faster while retaining the tax benefit on the investment borrowing. This approach depends on having sufficient cashflow to manage both commitments, and it requires periodic review as your circumstances and the regulatory environment change.

How the Tax Changes from 2027 Affect Your Strategy

From 1 July 2027, residential investment properties purchased after 7:30pm on 12 May 2026 will no longer allow you to offset rental losses against salary or other non-residential income unless the property qualifies as an eligible new build. Losses can only be offset against other rental income or carried forward to reduce future rental profits or capital gains. Properties held before that date, or under contract before that date, continue under the existing rules.

For Kooyong, where most stock is established period or post-war housing on large blocks, very few properties will meet the new build exemption. The legislation defines an eligible new build as a dwelling constructed on previously vacant land, or a property where the total number of dwellings increases. A knock-down rebuild that replaces one home with one home does not qualify, even if the new dwelling is substantially larger or of higher value.

This means an investor purchasing an established house in Kooyong will need to structure their finances so the property generates positive cashflow from the outset, or accept that losses will be quarantined and only recoverable when the property is sold or when other rental income becomes available. Quarantined losses are not lost permanently, but they no longer provide an immediate tax benefit in the year they are incurred.

In a scenario like this, a buyer purchasing a four-bedroom Edwardian in Kooyong might find the property generates a small loss each year once interest, rates, insurance, and agent fees are deducted from rent. Under the old rules, that loss would reduce their taxable income. Under the new rules, the loss is carried forward and used to reduce the capital gain when the property is eventually sold. The investor still benefits, but the timing of that benefit shifts from annual to eventual.

How Summit Finance Group Approaches Investment Lending

We work with buyers who are building portfolios as well as those purchasing their first investment property. The conversation usually starts with your borrowing capacity, but it extends into structure, timing, and alignment with your longer-term financial position. Access to investment loan options from banks and lenders across Australia means we can compare serviceability policies, interest rate pricing, offset and redraw features, and lender appetite for different property types and locations.

Kooyong sits within the City of Stonnington, and most lenders view the suburb as low-risk due to its established housing, strong demographics, and proximity to the CBD. That typically translates to competitive pricing and fewer restrictions on loan features compared to regional or high-density precincts. However, individual lender policies vary, particularly around loan to value ratio limits, debt-to-income assessments, and whether they will lend on properties with heritage overlays or larger land sizes that may attract future subdivision interest.

We also review your existing debt structure before recommending a new facility. If you have a mortgage on your home, we consider whether refinancing that loan at the same time as establishing the investment loan might improve your overall position, either through rate improvement, better offset arrangements, or a structure that supports future borrowing. More detail on that process is available through our refinancing service.

Call one of our team or book an appointment at a time that works for you. We work with investors across the City of Stonnington and surrounding areas, and we can walk through the lending and tax implications specific to your situation before you make an offer.

Frequently Asked Questions