How Tanya Can Secure a $700,000 Investment Property in 2025
Tanya is a self-employed tutor and single mum in Torquay, VIC. She wants to buy a $700,000 investment property but currently faces a monthly shortfall under her lender-assessed figures. By boosting income, reducing debt and optimising her home loan, Tanya can expand her borrowing capacity and reach her goal.
1. Tanya’s Financial Snapshot
- Gross Income: $120,000 p.a. (projected 2025), $60,000 p.a. (2024)
- Lender-assessed Net Income: $66,000 p.a. (~$5,500/month)
- Dependents: 1 child (5 years old)
- Existing Mortgage: $420,000 (repayments ~$2,700/month)
- ATO Debt: $20,000 (repayments ~$607/month)
- HEM Expenses: ~$3,500/month
- Total Commitments: ~$6,807/month
- Equity in PPOR: $324,000 usable (home valued at $930,000)
- Savings: $15,000
- Total Debt Load: $440,000
2. Challenge: Negative Cash Surplus
With $5,500/month in assessed income and $6,807/month in commitments, Tanya’s current surplus is –$1,307/month. At this rate, she won’t qualify for a new investment loan.
3. Strategy to Boost Borrowing Power
3.1 Grow Gross Income to $200,000
By expanding her tutoring business or taking on part-time teaching, Tanya can lift her gross earnings to $200,000. This raises her net lender-assessed income to about $11,500/month, generating a surplus of ~$4,693/month and enabling a borrowing capacity of $610,000+.
3.2 Eliminate ATO Debt ($20,000)
Using savings and positive cash flow, she can clear the ATO balance. This saves $607/month and adds roughly $78,900 to her borrowing limit.
3.3 Switch PPOR Loan to Interest-Only
Changing her principal-and-interest home loan to interest-only cuts repayments from ~$2,700 to ~$1,925/month, freeing up another $775/month.
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3.4 Combined Outcome
- Total Projected Surplus: ~$6,350/month
- Estimated Borrowing Capacity: $825,000+
- Meets the $560,000 loan needed for an 80% LVR on a $700,000 property.
4. Final Considerations
- Debt-to-Income Ratio: New total debt of ~$980,000 remains under the 6× income cap on $1.2 million.
- Use of Equity: Draw $140,000 from home equity for deposit, leaving $199,000 accessible.
- Future Rental Income: Estimated $700/week from the investment property will further boost borrowing power.
5. Recommendations
- Engage a mortgage broker who specialises in self-employed borrowers.
- Present strong 2025 financials to validate income growth.
- Consider lender’s mortgage insurance (LMI) if borrowing above 80% LVR to preserve cash.
Ready to Invest?
With a clear plan to grow income and manage debt, Tanya can secure the loan she needs in 2025—and so can you. For personalised advice on optimising your borrowing power, speak to an expert.
