A strong investment loan application shows a lender stable income, tidy debts and a clear purpose for the borrowing. Dentists often have good income, but lenders look closely at how that income is earned and what else you owe.
This guide walks you through what lenders weigh up, so you can fix weak spots before you apply and avoid delays.
How Do Lenders Assess an Investment Loan Application?
Lenders assess whether you can afford the loan at a rate well above the actual rate, and banks must test new borrowers at least 3.0 percentage points higher than the loan rate. That buffer applies to authorised deposit-taking institutions such as banks, credit unions and building societies, and it covers investment loans.
In practice, your income, living costs, existing debts and the new loan are all tested against that higher rate. Non-bank lenders are not bound by the same buffer, so their credit policies can differ. That is one reason a broker who can compare lenders across Australia is useful when your situation has a few moving parts.
Banks also face a portfolio-level limit on how much new lending can be at a debt-to-income ratio of six times or greater. It is not a cap on you personally. Each lender still decides your application under its own credit policy.
How Is Rental Income Counted for Borrowing?
Most lenders count only part of the expected rent. APRA's guidance says prudent policies shade rental income by at least 20 per cent, so no more than 80 per cent of expected rent is counted.
That shading allows for vacant periods. It is not a deduction for management fees, repairs or other holding costs. Lenders also tend to rely less on a rental appraisal than on actual rent received, so a property with a tenant in place can be easier to assess than a new purchase with an estimate only.
If you want to see how rent, salary and debts fit together before you apply, our borrowing capacity page is a good starting point.
What Counts Against You: Existing Debts and Credit Limits
Lenders look at every debt you hold, including your home loan, practice finance and credit cards. They ask about the balance, rate, remaining term and any redraw available.
For revolving facilities such as credit cards, lenders can apply a notional repayment based on the limit, not the balance. A card with a high limit that you never use can still reduce what you can borrow. Closing or lowering unused limits before you apply is a simple way to remove that drag, though you should keep any card you rely on for the practice.
If you carry several debts, a lender may view your position differently once they are rolled into one. Our page on debt consolidation loans for dentists explains when that may suit.
Ready to get started?
Book a chat with a Finance & Mortgage Brokers at Home Loans for Dentists today.
Interest Only or Principal and Interest: Which Suits an Investment Loan?
Interest only keeps repayments lower during the interest-only period, but it does not increase how much you can borrow. Lenders test interest-only loans on principal and interest repayments over the remaining term after the interest-only period ends.
As an example, take a 30-year loan with a 5-year interest-only period. The lender assesses repayments over the remaining 25 years, which gives a lower maximum loan than a standard principal and interest loan.
Here is an illustrative comparison at 6.75% p.a. on a $600,000 loan. Interest only costs about $3,375 a month. Principal and interest over 30 years costs about $3,891 a month. If the loan is interest only for 5 years and then reverts, repayments over the remaining 25 years rise to about $4,145 a month. The trade-off is that you owe the same amount at the end of the interest-only period, and the higher later repayments need to fit your budget.
Only the interest portion of a repayment is tax deductible on a rental property, under either structure. The principal portion is not. Speak with your accountant about how this applies to you. You can read more on interest only loans for dentists.
Investment Loan Amount and Deposit: Where LMI Fits In
Lenders mortgage insurance is generally required when the loan is above 80 per cent of the property value. The 80 per cent line is not a legal limit on borrowing. It is the point where lenders usually ask for insurance, and each lender sets its own caps.
The LMI premium is paid by the borrower and rises with the loan amount and loan-to-value ratio. The trade-off is a higher upfront cost in exchange for a smaller deposit. If your equity in an existing home is meant to fund the deposit, the lender will set its own limit on how much equity it will release.
Some lenders offer LMI waivers for certain professions, but eligibility is set by each lender and insurer, so check the current policy first. Our pages on LMI waivers for dentists and equity release loans for dentists cover both options.
Using Equity for the Deposit: A Worked Scenario
Consider a dentist who owns a home and wants to buy a rental property without using savings. Their income is mostly from a practice they part-own, and they have a credit card with a high limit and a car loan.
The plan is to borrow against the home's equity for the deposit and costs, with a separate loan secured on the new property. Before applying, they reduce the card limit and gather two years of tax returns and recent practice financials. The broker compares lenders on how they treat practice income and rent.
The outcome is a clean application with stable income evidence and a lower notional debt load. The loan against the home is used entirely for the investment purpose, which matters because tax deductibility depends on how borrowed funds are used, not on the security. Mixing in private spending on the same loan can reduce the deductible portion. The dentist should confirm the treatment with their accountant.
Negative Gearing Rules Have Changed: Check Before You Buy
For established homes bought after 7:30pm AEST on 12 May 2026, net rental losses can only be used against other residential property income from the 2027-28 income year. Properties held at that time keep their current treatment, and eligible new builds can continue to deduct losses against all income.
Properties bought between 12 May 2026 and 30 June 2027 can use the current rules until 30 June 2027 only. This does not change whether interest is deductible, but it changes how a loss can be used. It is worth asking your accountant to model your position before you commit, as the outcome depends on your income and the property type.
Refinancing an Existing Investment Loan
Refinancing an investment loan means moving it to another lender, often to change the rate, structure or access equity. Costs can include discharge fees and valuation fees, and these vary by lender.
Our team can review your current loan through a loan health check or look at investment loan refinancing for dentists options.
If you are ready to buy, call one of our team or book an appointment at a time that works for you. We will work through your income, debts and deposit with you and match your application to lenders that suit a dentist's situation. You can also read about buying your first investment property before we speak.
Frequently Asked Questions
How do banks test an investment loan application?
Banks must test new borrowers at a rate at least 3.0 percentage points above the loan rate. They also assess your income, living costs and existing debts.
How much rental income do lenders count?
APRA's guidance says prudent policies count no more than 80 per cent of expected rent. Individual lenders set their own rules on the evidence they accept.
Does interest only increase my investment loan amount?
No. Lenders test interest-only loans on principal and interest repayments over the remaining term, so borrowing capacity does not increase.
Is the interest on my investment loan tax deductible?
Interest on money borrowed to buy or hold a rental property is generally deductible, but the principal part of repayments is not. Speak with your accountant about your situation.
