Why Should Paddington Buyers Plan Duplex Finance First?

Buying a duplex in Paddington works best when you sort out the loan structure before you make an offer.

A duplex gives you two dwellings on one property, which can mean two sources of rent. It also means your lender looks closely at your income, your debts and how you plan to repay. This article covers the decisions that matter most, in the order you will face them.

How Much Can You Borrow for a Duplex Investment?

Your investment loan amount depends on your income, your existing debts and how the lender treats the expected rent. Lenders must also test whether you could still repay if rates rose.

APRA requires banks, credit unions and building societies (known as ADIs) to assess new borrowers at an interest rate at least 3.0 percentage points above the loan's actual rate. APRA also expects prudent lenders to count no more than 80 per cent of expected rent, to allow for times when a property is empty. Lenders usually place less weight on a rental appraisal than on rent already being received, so the way you evidence rent can affect your result.

There is also a limit on how many high debt-to-income loans (six times income or more) each ADI can write. It applies to the lender's whole portfolio, not to you as an individual, so your own application is still judged on its own merits. You can get a feel for your numbers on our borrowing capacity page before you start looking at properties.

Interest Only or Principal and Interest on a Duplex?

Interest only means you pay just the interest for a set period, while principal and interest pays down the debt from day one. Each suits a different goal, and each has a cost.

The main trade-off is that an interest only loan does not reduce what you owe during that period, and your repayments rise when it ends. It also does not lift your borrowing power. Lenders assess an interest only loan over the remaining term once principal and interest starts. As an example, a 30-year loan with a 5-year interest only period is assessed on repayments over the remaining 25 years.

For tax, interest on money borrowed to buy a rental property is deductible when the property is rented or available for rent. That applies to both repayment types, but only the interest part is deductible, never the principal. Which structure leaves you with a larger deduction is not something to assume, so ask your accountant. You can read more on our interest only loan page, and test both options with the mortgage repayment calculator.

What Does LVR Mean for a Duplex Loan?

LVR, or loan to value ratio, is your loan as a percentage of the property's value. Lenders Mortgage Insurance (LMI) is generally required when it goes above 80 per cent.

Eighty per cent is not a legal borrowing limit. It is the point where LMI usually applies, and the lender and the insurer both need to approve the loan. The LMI premium is paid by you, so a smaller investor deposit can mean a real extra cost. Each lender sets its own policies above 80 per cent, which is one reason it pays to compare options before you commit. If you want to understand your choices, our no LMI loans page explains how some buyers approach it.

If you plan to use an offset account, note that its balance does not reduce the loan amount when LVR is measured. It does reduce the interest charged on the loan.

How the Negative Gearing Changes Affect a New Duplex Purchase

From the 2027-28 income year, net rental losses on established residential properties bought after 7:30pm AEST on 12 May 2026 can only be used against other residential property income. Properties held before that time, and eligible new builds, keep the current treatment.

Consider a buyer who signs a contract for an established duplex after that date. They were counting on the rental loss to reduce tax on their salary. A property bought after 12 May 2026 and before 30 June 2027 can still be negatively geared under the current rules until 30 June 2027 only. From 2027-28, any excess loss on an established property is carried forward to offset residential property income, so it does not reduce salary tax.

Because of this, it is sensible to check that you can afford the repayments without relying on tax benefits, and to keep a cash buffer for periods when a dwelling is vacant.

Eligible new builds include dwellings that replace an existing property where the number of dwellings goes up. Whether a particular duplex qualifies is a question for your accountant, not an assumption to make at the contract stage. Capital gains tax rules are also changing from 1 July 2027, so ask your accountant how that fits your plans.

Costs and Risks to Weigh Up Before You Apply

The main costs of a duplex purchase are your deposit, stamp duty, any LMI and the repayments you must meet even when a dwelling is empty. If the duplex is strata titled, body corporate fees are another running cost to check. Your investment loan application should account for all of these, not only the purchase price.

If you already own a home, you may be able to use equity as part of your investor borrowing. Any extra borrowing needs lender approval, and the tax treatment depends on how the borrowed money is used. Interest on money used for private purposes is not deductible, so keep the purposes clearly separated and talk to your accountant first.

If things get tight later, you have rights. Under the National Credit Code, an individual with a regulated investment loan can tell their lender they cannot meet repayments, and the lender must respond within set time limits.

You can read more about investment loans and about how we work on our Paddington mortgage broker page.

Call one of our team or book an appointment at a time that works for you, and we will map out your duplex loan before you make an offer.

Frequently Asked Questions