A duplex investment loan is assessed on your income, your debts and the rent the property can earn. Construction professionals who are self-employed or paid variable income may find how they present that income matters.
This article covers how lenders assess a duplex purchase, how to structure the loan, and what the recent tax changes mean for the decision.
How Do Lenders Assess an Investment Loan for a Duplex?
Lenders assess an investment loan by testing whether you can repay it at a rate well above the actual loan rate. APRA requires banks and other authorised deposit-taking institutions to assess new borrowers at a rate at least 3.0 percentage points above the product rate.
Rental income helps, but it is discounted. APRA's guidance is that prudent lenders count no more than 80 per cent of expected rent, to allow for vacancy. Lenders also place less weight on a rental appraisal than on actual rent received, so a duplex that is already tenanted can be assessed differently from one yet to be let.
Existing debts count too. Lenders ask about current balances, rates, terms and available redraw, and they apply a notional repayment to credit card limits, even when the card is unused. Cutting unused limits before you apply can lift your investment loan amount.
Income type is where construction professionals differ from salaried buyers. A sole trader, subcontractor or company director will usually need to show tax returns and business financials, and each lender treats this income differently. Our investment loans team can match your income type to a lender whose policy suits it.
Is a Duplex One Property or Two for Lending Purposes?
That depends on the title. Lender policy varies, so confirm the title structure and the lender's policy before you sign a contract.
The title also affects your options later. Separate titles can allow separate loans or a sale of one half, though lenders and valuers each take their own view. Check this early with your broker, because it can change which lenders are suitable.
Interest Only or Principal and Interest: Which Suits a Duplex?
Interest only keeps repayments lower for a set period, while principal and interest reduces the debt from day one. Interest only does not increase how much you can borrow.
That is because lenders assess interest-only loans on principal and interest repayments over the remaining term after the interest-only period. A 30-year loan with a 5-year interest-only period is tested over 25 years, which usually means a lower maximum loan than an equivalent principal and interest loan.
The trade-off is that the balance does not fall during the interest-only period, and repayments rise when it ends. As an illustration only, at 6.75% p.a. a $700,000 loan costs about $3,937 a month in interest only. Over 30 years on principal and interest at the same rate, repayments are about $4,540 a month. If five years of interest only is followed by 25 years of principal and interest, repayments become about $4,836 a month. Use a repayment calculator to test your own numbers.
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What Does a Duplex Purchase Look Like in Practice?
A structured approach starts with the borrower's income and finishes with a loan that fits the plan. As an example, consider a self-employed carpenter who wants to buy a duplex and rent out both sides.
His income moves from year to year, and he holds a car loan and a credit card with a high limit. His broker reviews his tax returns and business financials as required by the lender, then recommends he close the unused card and clear the car loan from savings before applying. The broker then selects a lender whose policy suits self-employed income and applies for a principal and interest loan with an offset account.
The outcome is a stronger application. With fewer commitments counted against him, the lender's serviceability test leaves more room, and the repayments are tested comfortably. The trade-off is that he uses up some cash buffer to clear the car loan, so he keeps enough in reserve for vacancy and repairs. Results depend on the lender and his circumstances.
What Do the Negative Gearing Changes Mean for a Duplex Purchase?
Negative gearing rules now depend on whether the property is an established dwelling or an eligible new build, and on when you acquire it. Speak to your accountant before you buy, because the outcome turns on your own situation.
For established residential properties acquired after 7:30pm AEST on 12 May 2026, net rental losses are deductible only against other residential property income from the 2027-28 income year. Eligible new builds acquired after that date can continue to deduct losses against all income. However, a new build occupied for more than 12 months before sale to a subsequent investor loses this treatment for that purchaser. Confirm eligibility with your accountant. Eligible new builds include dwellings built on previously vacant land, and dwellings that replace an existing property where the number of dwellings increases.
This matters to construction professionals because a duplex built on vacant land, or one that adds dwellings to a site, may qualify as an eligible new build. A knock-down rebuild that does not increase the number of dwellings does not qualify. Interest remains deductible on a rental property, but only the interest, not the principal repayment. Your accountant can confirm how this applies to you.
How Much Deposit Does an Investor Need, and When Does LMI Apply?
Lenders mortgage insurance is generally required when your loan exceeds 80 per cent of the property value. The 80 per cent line is a lender convention, not a legal maximum, so borrowing above it is possible with lender approval and LMI.
The cost of LMI is paid by the borrower and rises with the loan to value ratio and loan amount. The main trade-off is that a smaller deposit means a higher premium plus higher repayments.
If you already own property, you may be able to use equity towards the deposit, subject to the lender's approval, valuation, serviceability assessment and LVR policy. The extra borrowing is secured against your existing property and adds to your total debt. Equity release carries its own rule: under ATO guidance, interest is deductible based on how the borrowed money is used, so funds used for a private purpose are not deductible. Keep the investment portion separate from any private spending, and discuss your structure with your accountant. If you are comparing a build with a purchase, our construction loans page explains that route, and you can also review a refinance if an existing loan is limiting your next step.
Fixed or Variable Rate for a Duplex Loan?
A variable rate moves with the lender's pricing, while a fixed rate holds for a set period. Some investors split the loan between the two.
Fixed rates give certainty on repayments, but features such as offset accounts, extra repayments and redraw can be limited on fixed portions, depending on the lender. Break costs can apply if you exit a fixed loan early. Variable loans usually offer more flexibility, but repayments can rise. Ask each lender about the features attached to each portion before you commit.
For a clear view of the options across banks and lenders, speak with the team at MJ Finance and Advisory.
Call one of our team or book an appointment at a time that works for you, and we will map your income, your duplex and your loan structure before you make an offer.
Frequently Asked Questions
Does an interest-only loan increase how much I can borrow for a duplex?
No. Lenders assess interest-only loans on principal and interest repayments over the remaining term, which usually means a lower maximum loan than an equivalent principal and interest loan.
Is LMI always required on an investment loan?
LMI is generally required when the loan exceeds 80 per cent of the property value. The 80 per cent line is lender policy rather than a legal maximum, and each lender sets its own caps.
Can a new duplex still be negatively geared?
Eligible new builds acquired after 12 May 2026 can continue to deduct losses against all income. However, a new build occupied for more than 12 months before sale to a subsequent investor loses this treatment for that purchaser. Confirm eligibility with your accountant.
How do lenders count rental income from a duplex?
APRA's guidance is that prudent lenders count no more than 80 per cent of expected rent. Lenders also tend to rely more on actual rent received than on a rental appraisal.
