How much can you borrow for an investment property?

For most people buying an investment property, the deposit isn't what limits them. Plenty of homeowners have enough equity for a deposit. What decides how much they can actually spend is borrowing capacity — how much a lender is prepared to lend against their income.

This guide explains how lenders work that number out, the two regulatory settings that shape it, the everyday things that shrink it, and why the most you can borrow isn't the same as what you can comfortably carry.

How a lender works it out

Every lender has its own calculator, but they all ask the same question: after your living costs and existing debts, is there enough income left to meet the repayments on the new loan — even if rates rise?

What goes in

• Your income. Base salary is counted in full. Overtime, bonuses and commission are often only partly counted, or need a history. Self-employed income usually needs tax returns.
• Rent from the new property. Lenders rarely count all of the expected rent. They discount it to allow for vacancies and costs.

What comes out

• Living expenses. Lenders compare what you declare with a benchmark for a household like yours, and generally use the higher of the two.
• Every existing debt. Your home loan, car loans, personal loans and buy now, pay later accounts.
• Credit card limits. A lender assesses a card on its limit, not its balance — so an unused card with a $20,000 limit still counts against you.
• Dependants. More dependants means higher assumed living costs.

Setting 1: the 3 percentage point buffer

APRA, the banking regulator, expects banks to test whether you could still make repayments if interest rates were at least 3 percentage points higher than the rate on your loan. APRA has kept the buffer at 3 percentage points.

That buffer is why borrowing capacity is so much lower than the repayments alone would suggest.

Many investment loans start interest-only. When the interest-only period ends, repayments rise to include principal — and lenders generally assess the loan on those higher repayments over the remaining term.

Setting 2: the debt-to-income limit

From February 2026, APRA also requires banks to limit loans at a debt-to-income ratio (DTI) of six or more to 20% of their new mortgage lending. The limit applies separately to owner-occupier and investor lending.

Your DTI is your total debt divided by your gross income.

This isn't a hard cap on any one borrower. It's a limit on how much of this kind of lending each bank can write. APRA said when it announced the limit that it wasn't expected to bind at an aggregate level straight away. But a high-DTI application is competing for a limited share of the bank's lending, and some lenders apply their own tighter policies. The limit applies to banks and other authorised deposit-taking institutions, not to non-bank lenders.

Investors feel this most, because an investment loan adds a lot of debt without adding much counted income.

What shrinks your borrowing capacity

• Credit cards you don't use. Cancelling them, or cutting the limits, is often the quickest improvement.
• Car loans, personal loans and buy now, pay later accounts, even small ones.
• HELP study debts. Compulsory repayments reduce your take-home pay.
• High declared spending. Lenders look at your bank statements.
• Irregular income without a track record.
• Existing investment loans, which are assessed at the buffered rate too.

What can increase it

• Paying out or closing small debts before you apply.
• A second borrower's income — though you're then both fully responsible for the whole loan.
• A different lender. Lenders treat rental income, bonuses and existing debts differently, so the same household can get very different answers. That's a large part of a mortgage broker's value.
• Buying where rent is higher relative to the price. More counted rent can support more borrowing.

Borrowing capacity isn't what you should borrow

The maximum a lender will approve is a stress-tested ceiling, not a comfortable target. Before you get close to it, consider:

• Can you hold the property through a vacancy, a major repair or a rate rise? Those arrive together more often than you'd like.
• Is the tax refund in your budget? If you're buying an established property, from 1 July 2027 a rental loss can no longer reduce the tax on your wages — it's carried forward instead. Plan to fund the whole shortfall yourself. See negative gearing after the 2026 Budget.
• What happens when an interest-only period ends? Work out the repayment you'll move to.
• Do you have a cash buffer? Equity can't pay an unexpected bill.

Steps before you start looking

1. Tidy your finances. Close unused cards, pay off small debts, and keep three months of statements clean.
2. Work out your usable equity. See how to use equity to buy an investment property.
3. Get pre-approval so you know your ceiling before you fall for a property.
4. Talk to a broker rather than applying to lender after lender. Every formal application leaves a credit enquiry on your file.
5. Set your own limit below the lender's, based on what you could hold for years.