If you want a rental property to bring in income, the loan structure matters as much as the property. A teacher's salary is steady, and lenders like steady. That gives you a solid base to build from.
This guide covers how lenders assess an investment loan, how interest-only compares with principal and interest, and what the new negative gearing rules mean for your plan.
How Much Can a High School Teacher Borrow for an Investment Property?
Your investment loan amount depends on your income, your existing debts and living costs, and the lender's own policy. Every bank must test whether you could still afford repayments if the interest rate rose 3.0 percentage points above the loan rate.
That buffer applies to all banks, credit unions and building societies regulated by APRA. It means a lender will often approve less than you hope for, so it pays to check your number early. You can run a rough estimate with our borrowing capacity calculator.
Existing debts count too. Lenders look at your home loan balance, car loan and credit card limits. A card with a high limit can reduce what you can borrow, even if you never use it.
Does Rental Income Count Towards Your Loan?
Yes, lenders usually count part of the expected rent, but not all of it. APRA's guidance says prudent lenders count no more than 80 per cent of expected rent, to allow for times when the property is empty.
The other 20 per cent is not a cost like repairs or agent fees. It is a safety margin for vacancy. Lenders also tend to rely less on a rental appraisal than on rent actually received, so a property with a tenant already in place can be assessed differently to one you plan to rent out.
Because lenders each set their own rules on rental evidence, a mortgage broker for teachers can tell you which lenders suit your situation before you apply.
Interest Only or Principal and Interest: Which Suits a Rental Property?
Interest-only repayments are lower in the early years, but you do not pay down the loan. Principal and interest repayments cost more each month, but your balance falls over time.
Here is an illustrative example at 6.75% p.a. Say you borrow $500,000 over 30 years. Interest-only repayments would be about $2,813 a month. Principal and interest would be about $3,243 a month. That is roughly $430 a month less on interest-only.
The trade-off shows up when the interest-only period ends. If it runs for five years, the loan then switches to principal and interest over the remaining 25 years. At the same 6.75% rate, that repayment is about $3,455 a month, which is higher than the $3,243 you would have paid from day one. You still owe the full $500,000 at that point.
Interest-only does not lift your borrowing capacity either. Lenders test you as if you were paying principal and interest over the remaining term, so the structure does not help you borrow more. Our page on interest only loans for teachers explains the options in more detail.
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Negative Gearing Rules Changed in 2026: What Teachers Need to Know
The rules depend on when you buy and what you buy. Properties held at 7:30pm AEST on 12 May 2026, including those under contract at that time, keep full negative gearing. Eligible new builds bought after that date can also keep it.
From the 2027-28 income year, a net rental loss on an established residential property bought after that time can only be used against other residential property income, such as rent or residential capital gains. It cannot reduce your teaching salary for tax purposes. Any excess loss can be carried forward. Properties bought between 12 May 2026 and 30 June 2027 can use the current rules until 30 June 2027 only.
This changes how you should think about cash flow. If you buy an established property, plan to cover any shortfall from your own pay without counting on a tax refund. Interest on an investment loan is still deductible, but the change affects how a loss can be used. Speak to your accountant about your own situation before you buy.
Capital Gains Tax Is Changing From 1 July 2027
From 1 July 2027, the 50 per cent CGT discount is replaced by indexing the cost base to inflation, with a 30 per cent minimum tax rate on real gains accruing from that date. For gains built up before that date, the current rules apply to that portion.
For a long-term holder, this means the tax on a future sale may be worked out in two parts. Eligible new builds give you a choice between the discount and indexation. The details are technical, so get advice from your accountant before you commit.
Example: A Teacher Weighing Up a Rental Purchase
Consider a high school teacher with a home loan and a partner who also earns a salary. They want a rental property and are unsure whether to use equity in their home or save a deposit.
They ask a broker to compare lenders. The broker explains that borrowing against home equity creates a second loan, and that the interest is only deductible for the part used to buy the rental. Any money taken out for personal use, such as a holiday, is not deductible. So the couple keep the borrowed amounts for the rental and the personal spending separate, and they pick a loan split that makes that clear.
The outcome is a structure they understand. The rental loan is set up as principal and interest at the illustrative 6.75% p.a. rate, so the debt falls over time, and their accountant confirms the tax treatment. The trade-off is a higher monthly repayment than interest-only, which they accept for the faster debt reduction. If you are thinking about using your home's equity, see equity release loans for teachers.
What Deposit and LMI Mean for an Investment Loan
Most lenders ask for lenders mortgage insurance when your loan is above 80 per cent of the property value. That is lender policy, not a legal cap on borrowing.
LMI is paid by you, and the cost depends on the loan size and the loan to value ratio. A smaller deposit means a higher premium and more debt. Some lenders offer LMI waivers for certain occupations, but eligibility varies, so check the terms on our LMI waivers for teachers page. Your home loans for teachers options may also affect how much equity you can use.
Before you apply, check each cost: stamp duty in your state, body corporate fees if you buy a unit, insurance and agent fees. These reduce the income you keep, so build them into your numbers.
Call one of our team or book an appointment at a time that works for you. We will go through your numbers, compare lenders across Australia and help you choose a structure you can live with. You can also look at our mortgages for teachers page to see how we work.
Frequently Asked Questions
Do lenders count all the rent from an investment property?
No. APRA's guidance says prudent lenders count no more than 80 per cent of expected rent, to allow for vacancy. Each lender sets its own rules on what rental evidence it accepts.
Does an interest-only loan let me borrow more?
No. Lenders assess interest-only loans as if you were paying principal and interest over the remaining term. That usually means a lower maximum loan, not a higher one.
Can I still negatively gear a rental property?
It depends on when you buy and what you buy. Properties held at 7:30pm AEST on 12 May 2026 and eligible new builds keep the current treatment. Speak to your accountant about your situation.
When do I need lenders mortgage insurance?
LMI is generally required when your loan is above 80 per cent of the property value. The cost depends on the loan size and the loan to value ratio, and lenders set their own limits.
