The easiest way to finance an investment townhouse

If you're purchasing an investment townhouse in The Gables, your deposit requirement and borrowing capacity will determine which properties you can realistically target.

The suburb's proximity to the Riverstone train station and the Marsden Park employment precinct has made it a recurring choice for investors who want rental demand anchored to transport and work. Townhouses in particular appeal to tenants who need more space than an apartment but want to avoid yard maintenance, which keeps occupancy rates consistent compared to some other property types in the area.

Deposit and Lenders Mortgage Insurance for townhouse purchases

Most lenders require a minimum 10 per cent deposit for investment purchases, though some will extend to 5 per cent depending on your income profile and the property location. A deposit below 20 per cent triggers Lenders Mortgage Insurance, which protects the lender if you default but adds several thousand dollars to your upfront costs. LMI is calculated on the loan amount above 80 per cent of the property value and is usually capitalised into the loan rather than paid in cash.

Consider a buyer purchasing a townhouse at the current median in The Gables. With a 10 per cent deposit, they would pay LMI on the additional 10 per cent borrowed. That premium might sit anywhere between $8,000 and $15,000 depending on the lender and the final loan amount. The same buyer with a 20 per cent deposit avoids the premium entirely, though they need to tie up more capital upfront. If you plan to build a portfolio of multiple properties, spreading equity across deposits and accepting LMI on some purchases can be a faster path than waiting to save a full 20 per cent each time.

How rental income affects borrowing capacity

Lenders assess your borrowing capacity using a serviceability buffer that sits 3 percentage points above the product rate, and they apply an 80 per cent credit to forecast rental income. That means if a property is expected to generate $650 per week in rent, the lender will only count $520 of that figure when calculating what you can afford to repay.

The debt-to-income cap introduced in February means lenders are restricted in how many loans they can approve at six times your gross income or higher. If your salary is $120,000, that threshold sits at $720,000. Loans above that level are still available, but the lender must fit them within a quota, so approval depends on your overall credit profile and the size of your deposit. In our experience, investors who can demonstrate equity in an existing property or who are purchasing a property with strong rental yield have more room to move within those caps.

Interest only versus principal and interest for townhouse investors

Interest only repayments keep your monthly cost lower and preserve cash flow, which matters if you're holding multiple properties or planning to reinvest the difference. Most lenders offer interest only periods of up to five years on investment loans, after which the loan reverts to principal and interest unless you apply for an extension.

A principal and interest structure reduces your debt over time and may offer a slightly lower rate, but the higher repayment means less flexibility month to month. The right structure depends on whether you're focused on portfolio growth or debt reduction. Investors who plan to hold the property long term and eventually retire the loan tend to favour principal and interest. Those who intend to sell or refinance within a few years and want to maximise leverage during that window often choose interest only.

What changed on negative gearing from July 2027

From 1 July 2027, rental losses on residential properties purchased after 7:30pm on 12 May 2026 can no longer be offset against your salary or other non-property income unless the property qualifies as an eligible new build. Those losses are quarantined and can only be used against future rental income or capital gains from residential property. Properties held before that date, or under contract before that time, are grandfathered and continue under the existing rules.

Townhouses that qualify as new builds, defined as dwellings constructed on previously vacant land or where the number of dwellings has increased, retain access to negative gearing. A knock-down rebuild that replaces one dwelling with one dwelling does not qualify. If a new build is occupied for more than 12 months before being sold to a subsequent investor, that subsequent purchaser loses access to negative gearing.

The change matters most in the first few years of ownership when interest costs, body corporate fees, and other claimable expenses typically exceed rental income. If you were planning to offset a $10,000 annual loss against a $120,000 salary, that deduction previously reduced your taxable income to $110,000. Under the new rules, that loss is banked and carried forward instead. It can still reduce tax when you eventually sell or when the property becomes cash flow positive, but the immediate tax benefit disappears unless the property is an eligible new build.

Variable versus fixed rates for investment property

Variable rates allow you to make extra repayments, redraw funds, and refinance without penalty, which is useful if your circumstances or the market shift. Fixed rates lock in your repayment for a set period, usually between one and five years, but come with restrictions on additional repayments and steep break costs if you need to exit early.

Investors who want the option to access equity for a future purchase or who expect rates to fall often prefer variable. Those who want certainty over cash flow and are comfortable holding the property without changes tend to lock in part or all of the loan. Splitting the loan between variable and fixed gives you access to some flexibility while capping part of your repayment, though it adds complexity when you refinance or restructure.

Claimable expenses and how they reduce taxable income

Interest on your investment loan is fully deductible, as are body corporate fees, property management fees, council and water rates, landlord insurance, repairs, and depreciation on the building and fixtures. Stamp duty and other acquisition costs are not immediately deductible but form part of your cost base when you calculate capital gains.

Townhouses in The Gables typically incur body corporate fees between $800 and $1,500 per quarter depending on the facilities and age of the complex. Those fees cover common area maintenance, insurance on shared structures, and sinking fund contributions. They reduce your cash flow but increase your deductions, which partially offsets the cost depending on your marginal tax rate. If you're refinancing an existing home loan to release equity for the deposit, only the portion of interest attributable to the investment property is deductible. The portion relating to your owner-occupied property remains non-deductible even if the loans are secured against the same asset.

Accessing equity from an existing property

If you already own a home in The Gables, Riverstone, Marsden Park, or another Western Sydney suburb, the equity in that property can be used as part or all of your deposit without selling. Lenders will typically allow you to borrow up to 80 per cent of the combined value of both properties without paying LMI, though some will extend to 90 per cent if you accept the insurance premium.

Equity release works by refinancing your existing loan to a higher amount and using the difference as your deposit. The entire loan remains secured against your home, and the new investment property becomes additional security. This keeps your capital available for other investments or expenses, but it increases your debt against your primary residence, which matters if property values fall or if you need to sell. We regularly see investors use this structure to enter the market faster than they could by saving cash, particularly when they expect rental income to cover most or all of the additional repayment.

Call one of our team or book an appointment at a time that works for you. We'll run the numbers on your deposit, your borrowing capacity under the current DTI settings, and which investment loan options suit your timeline and the property you're targeting.

Frequently Asked Questions