What are the Lending Rules for Holiday Home Loans?

Buying a holiday home on the Sunshine Coast means applying for an investment loan, even if you never plan to rent it out.

Lenders treat any property that isn't your main residence as an investment, which changes the interest rate, deposit requirement, and serviceability calculation. The distinction matters because investment loans are priced differently and assessed more conservatively than owner-occupied lending. You can't switch between the two categories after settlement based on how you use the property.

How Lenders Assess a Holiday Home Loan Application

Your borrowing capacity for a holiday home depends on your current income, existing debt, and whether you still have a mortgage on your main residence. Lenders apply a serviceability buffer of at least 3.0 percentage points above the loan product rate, which means they assess whether you could still afford the repayments if rates rose by that margin. If you're keeping your existing home loan and adding a second property loan on top, both repayments are included in the serviceability test.

Consider a Sunshine Coast couple earning a combined income of $160,000 who own their main residence with $280,000 remaining on the mortgage. They want to purchase a holiday home at Coolum Beach. The lender calculates serviceability using both the existing mortgage repayment and the proposed holiday home loan repayment, assessed at the product rate plus the buffer. In this scenario, the couple's borrowing capacity would be lower than if they were purchasing their first property, because the existing mortgage reduces the amount of income available to service new debt.

Deposit and Loan to Value Ratio Requirements

Most lenders require a minimum 10% deposit for an investment property, though some will lend at higher loan-to-value ratios with lenders mortgage insurance. If the LVR exceeds 80%, LMI applies, and the premium increases on a sliding scale as the deposit decreases. The premium is calculated based on both the loan amount and the LVR, and is typically added to the loan balance rather than paid upfront.

For a holiday home purchase where no rental income will be declared, some lenders apply a slightly higher deposit requirement or a maximum LVR of 90% rather than 95%. This reflects the additional risk of servicing a loan on a property that generates no offsetting income. Genuine savings or equity in your existing home can be used to meet the deposit requirement, and if you're using equity, the lender will require a valuation of your current property to confirm available equity after accounting for sale costs and any remaining debt.

Interest Rates and Loan Structure for Holiday Homes

Investment loan interest rates are typically 0.20% to 0.50% higher than equivalent owner-occupied rates, depending on the lender and loan features. A fixed rate, variable rate, or split loan structure can all be used for a holiday home purchase, and the choice depends on your risk tolerance and how long you plan to hold the property. Fixed rates provide certainty over repayments for the fixed period, but come with break costs if you repay the loan early. Variable rates allow unlimited additional repayments and access to an offset account, which can be useful if you have irregular income or want to reduce interest by parking savings against the loan balance.

An offset account linked to an investment loan only reduces the interest charged on the loan. It doesn't change the tax treatment. If you use an offset account, make sure you keep separate records for any funds that relate to other purposes, because mixing personal and investment funds in the same account can complicate your tax position if you later decide to rent the property out.

What Happens If You Later Decide to Rent the Holiday Home

If you start renting out a property that was initially purchased as a private holiday home, the loan remains classified as an investment loan and the interest continues to be deductible. The tax treatment changes because rental income becomes assessable and you can claim deductions for expenses including loan interest, council rates, insurance, and maintenance. You need to notify your lender if the property becomes tenanted, because some loan contracts require disclosure of a change in occupancy status.

For properties purchased after 12 May 2026, negative gearing rules apply from the 2027-28 income year. Losses can only be offset against other residential property income, not against salary and wages. From 1 July 2027, capital gains tax on residential investment property will be calculated using cost base indexation and a minimum 30% tax rate on gains accruing from that date, replacing the 50% CGT discount for gains accruing after that date. These rules apply to holiday homes in the same way they apply to any other residential investment property.

Sunshine Coast Property Price Caps and Government Schemes

The Australian Government 5% Deposit Scheme and Help to Buy scheme do not apply to holiday home purchases. Both schemes are limited to first home buyers purchasing a property they intend to live in as their main residence. The Sunshine Coast is classified as a regional centre under the scheme, with a price cap of $1,000,000 for eligible first home buyers, but that cap is irrelevant for second property purchases.

Queensland stamp duty concessions for first home buyers also do not apply. Standard transfer duty rates apply to all holiday home purchases regardless of whether the buyer has previously owned property. At current rates, duty on a property valued at $600,000 would be approximately $16,000, and on a property valued at $800,000 would be approximately $25,000. These costs need to be included in your upfront budget alongside the deposit, LMI premium if applicable, and settlement costs including legal fees and adjustments.

Structuring the Loan Across Multiple Properties

If you have equity in your main residence and want to use that equity as part of your deposit for the holiday home, the lender can structure the lending with a split security arrangement. This means one loan is secured against your main residence and another loan is secured against the holiday home, or a single loan is secured across both properties. The structure you choose affects flexibility if you later want to sell one property without disturbing the other loan.

Keeping the loans separate provides more flexibility, but may involve slightly higher establishment costs because two loan accounts are created. A single loan secured across both properties may have lower upfront costs but creates a cross-securitisation, which means you can't sell one property and discharge the mortgage on that property without refinancing or repaying a portion of the total debt. Your broker can model both structures and show you the difference in cost and flexibility before you proceed with the home loan application.

Call one of our team or book an appointment at a time that works for you. We work with buyers across the Sunshine Coast and can walk through how lenders will assess your holiday home purchase, what loan structure suits your situation, and what documents you'll need to move forward with confidence.

Frequently Asked Questions