Choosing between investment loan products comes down to how well the structure fits your income pattern and property goals.
As a dental hygienist, your income profile sits in a distinct position. You earn a professional salary but you're not always qualifying for the specialist professional packages that dentists access. That doesn't limit your options, but it does mean comparing investment loan features requires a closer look at what you actually need versus what lenders market as premium benefits.
Interest Only Versus Principal and Interest Repayments
Interest only investment loans allow you to pay just the interest portion for a set period, typically one to five years, which reduces your monthly outlay and can maximise tax deductions on the interest component. The alternative is principal and interest repayments where you pay down the loan amount from day one.
Consider a dental hygienist earning around $80,000 annually who purchases a two-bedroom unit for $550,000 with a 10% deposit. On an interest only loan, monthly repayments might sit around $2,100 at current variable rates, compared to roughly $2,800 on principal and interest. That $700 monthly difference matters when you're also managing living expenses and potentially saving for your own home deposit.
The catch with interest only periods is that the loan amount doesn't reduce, so you're not building equity through repayments. You rely entirely on property value growth and rental income to build your position. Once the interest only period ends, repayments increase substantially as you start paying down the principal over the remaining loan term. This structure works when you're focused on cash flow in the early years and expect your income to grow, or when you plan to sell or refinance before the period ends.
Variable Rate Versus Fixed Rate Investment Loans
Variable interest rates move with the market and your lender's pricing decisions, while fixed rates lock in your repayment amount for one to five years regardless of broader rate changes.
In our experience, hygienists often lean toward variable rates for investment properties because they preserve flexibility. You can make extra repayments without penalty, access redraw facilities if the loan allows it, and refinance without break costs if you find better terms elsewhere. Fixed rates provide certainty but they come with restrictions that can cost you if your circumstances change.
A scenario to consider: you lock in a three-year fixed rate at 6.2% on your investment loan, then six months later your employer offers you additional shifts that boost your income by $15,000 annually. You want to pay down the loan faster to reduce interest costs, but your fixed loan won't accept extra repayments beyond a small threshold without penalties. Meanwhile, vacancy rates in your suburb increase and you need to access funds quickly for property maintenance to keep tenants. A fixed rate loan without an offset or redraw facility leaves you stuck.
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Loan to Value Ratio and Deposit Requirements
Investor deposit requirements typically start at 10% of the property value, but staying below 80% loan to value ratio means avoiding Lenders Mortgage Insurance, which can add thousands to your upfront costs.
Most lenders allow you to borrow up to 90% for investment properties if you pay LMI, and some will extend to 95% in specific circumstances. As a dental hygienist, you won't usually access the LMI waivers that dentists might qualify for through professional packages, so that cost becomes a real consideration when comparing loan options.
If you're purchasing that $550,000 unit with a 10% deposit, your loan amount is $495,000, which puts your LVR at 90%. LMI at that level might cost $15,000 to $18,000 depending on the lender. Increasing your deposit to 20% eliminates that cost entirely but requires an additional $55,000 in savings. For hygienists who've been working a few years and are ready to enter the property market, this calculation often determines whether you start now with LMI or wait another year to build your deposit.
Offset Accounts and Redraw Facilities on Investment Loans
An offset account linked to your investment loan reduces the interest you pay by offsetting your account balance against the loan amount, while a redraw facility lets you withdraw any extra repayments you've made above the minimum.
The distinction matters for tax purposes. Interest charged on your investment property loan remains tax deductible, but if you redraw funds for personal use, you can muddy the waters on what portion of your interest remains claimable. An offset account keeps your personal savings separate while still reducing interest costs, which maintains cleaner records at tax time.
Not all investment loan products include offset accounts. Some lenders reserve them for owner-occupied loans or charge higher interest rates on investment loans that include this feature. When comparing options, calculate whether the interest rate difference justifies the offset benefit based on how much you typically keep in savings.
Accessing Investment Loan Options From Multiple Lenders
Each lender structures their investment loan products differently, with variations in rate discounts, fees, LVR limits, and acceptable property types.
Working with a broker who understands the dental profession means you're not limited to the one or two products your own bank offers. We regularly see situations where a hygienist's primary bank quotes a variable rate 0.4% higher than what's available through a different lender, simply because the hygienist doesn't meet that bank's criteria for their best pricing tier. Across a $495,000 loan, that rate difference costs roughly $1,980 annually in additional interest.
Some lenders also have stricter policies on property types. If you're looking at a unit in a building with higher body corporate fees or lower rental yields, certain lenders will either decline the application or lend at a reduced LVR. Investment loan refinancing becomes relevant here as well. If your financial position or the property market has improved since you first borrowed, refinancing to a lender with better terms can reduce your ongoing costs substantially.
Rental Income Assessment and Borrowing Capacity
Lenders typically assess 70% to 80% of the expected rental income when calculating how much you can borrow for an investment property, accounting for vacancy periods and maintenance costs.
If that $550,000 unit generates $480 per week in rent, that's $24,960 annually. Lenders might assess 80% of that figure, which is $19,968, when determining whether you can service both your existing commitments and the new investment loan. Your regular salary as a hygienist covers most of the serviceability calculation, but that rental income contribution can make the difference between approval and decline when you're borrowing at higher LVRs.
Understanding how different lenders assess rental income helps when you're comparing loan amounts you can access. Some lenders are more conservative and only recognise 70%, which can reduce your maximum borrowing capacity by $20,000 to $30,000 compared to a lender assessing at 80%.
Comparing investment loans means looking past the advertised rate to how each product fits your actual financial situation and property strategy. Call one of our team or book an appointment at a time that works for you to talk through which loan structure suits where you're at now and where you're heading in the next few years.
Frequently Asked Questions
Should dental hygienists choose interest only or principal and interest for investment loans?
Interest only repayments reduce your monthly outlay and maximise tax deductions, which helps with cash flow in the early years of property ownership. Principal and interest repayments build equity from day one but cost more each month, so the choice depends on your income growth expectations and overall property strategy.
What deposit do I need as a dental hygienist for an investment property?
You can access investment loans with a 10% deposit, though staying at 20% or higher avoids Lenders Mortgage Insurance. Dental hygienists don't typically qualify for the LMI waivers available to dentists, so the deposit amount directly affects your upfront costs.
How do lenders assess rental income for investment loan applications?
Most lenders assess 70% to 80% of expected rental income when calculating your borrowing capacity, accounting for potential vacancy periods and maintenance costs. This assessment varies between lenders and can affect how much you can borrow by tens of thousands of dollars.
Is a variable or fixed interest rate better for investment loans?
Variable rates provide flexibility to make extra repayments and refinance without penalties, while fixed rates lock in your repayment amount but restrict changes. Variable rates suit most dental hygienists who want to maintain options as their income and circumstances evolve.
What is the difference between an offset account and redraw facility on an investment loan?
An offset account reduces interest charges while keeping your savings separate from the loan, which maintains cleaner tax records. A redraw facility lets you access extra repayments but can complicate tax deductions if you withdraw funds for personal use.
