A holiday home isn't just a weekender. For registered nurses and midwives, it's rental income potential, future equity, and a place your family can use when rosters allow.
Should You Buy a Holiday Home as an Investment or Owner-Occupied Property?
You'll borrow under an investment loan if you're renting the property out for part of the year, even if you also use it personally. Lenders classify any property generating rental income as an investment, and that determines your interest rate, your tax deductions, and how they assess your serviceability. If you're using the property purely for personal holidays with no rental activity, it can be structured as an owner-occupied loan, though most nurses purchasing a coastal or regional property intend to offset holding costs with short-term rental income during peak seasons.
Consider a nurse who purchases a unit near the coast with the intention of using it over summer and renting it out for the remaining nine months. That property will be assessed as an investment from a lending perspective, even if personal use is the primary motivation. The lender will apply an investment interest rate, which at current variable rates typically sits 0.2 to 0.4 percentage points higher than an owner-occupied rate, and they'll assess rental income at 80 percent of the stated amount to account for vacancy and management costs. You'll still be able to claim interest, rates, insurance, and depreciation as tax deductions against that rental income, which often brings the effective cost of holding the property below the headline repayment figure.
How LMI Waivers Apply to Holiday Home Purchases
The LMI waivers available to registered nurses through lenders like Westpac, St.George, and Bank of Melbourne are designed for owner-occupied and standard investment property purchases. Holiday homes purchased as investments are eligible for these waivers, provided the property is not a serviced apartment, strata hotel, or other commercially managed tourist product. Most lenders exclude properties where a management agreement restricts your right to occupy the property at any time, which rules out some resort-style developments but leaves the majority of coastal units and regional houses available.
Westpac's 90 percent LVR waiver for registered nurses requires a minimum annual income of $90,000 and current AHPRA registration. If you're purchasing a holiday home in a regional area where values sit below metropolitan medians, this waiver can reduce your deposit requirement from 20 percent to 10 percent, freeing up capital you may prefer to hold in offset or direct toward renovations before the first rental season.
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Fixed Rate, Variable Rate, or Split Loan for a Holiday Home
A split loan structure gives you certainty on part of your repayment while keeping access to offset and redraw on the variable portion. Nurses working rotating rosters often receive irregular overtime and shift allowances, and those funds are most useful when they can be parked in an offset account linked to the variable portion of the loan. The fixed portion provides a floor under your repayment, which matters if you're relying on rental income to service part of the loan and you want to remove interest rate risk during the first few years of ownership.
In practice, a 50/50 split between fixed and variable is common. You fix half the loan for two or three years at a rate that won't move, and you link an offset account to the variable half so any surplus income reduces the interest charged on that portion. If you're holding back a portion of your deposit as a cash buffer for maintenance or vacancy periods, that cash can sit in the offset account rather than a separate savings account, and it will reduce your loan interest in real time without locking the funds away.
Interest-Only Repayments and Cash Flow Management
Interest-only loans are structured to minimise your monthly repayment during the initial period, which can be useful if you're managing holding costs on a holiday home that's vacant for part of the year. Instead of paying down principal and interest from day one, you pay only the interest component for a set period, typically one to five years. This frees up cash flow during the early ownership phase, and for a property generating rental income, it often means the rent covers most or all of the repayment without requiring you to top up from your salary.
We regularly see nurses purchasing regional properties with strong peak-season rental demand but low occupancy outside summer or school holidays. An interest-only structure during the first few years allows them to hold the property through the low-occupancy months without financial strain, and they switch to principal and interest repayments once rental income stabilises or their base salary increases. Lenders assess interest-only applications using the principal and interest repayment rate at the end of the interest-only period, so your borrowing capacity won't increase by choosing interest-only, but your actual monthly commitment will be lower during the interest-only term.
Offset Accounts and Why They Matter More for Holiday Homes
An offset account is a transaction account linked to your home loan where the balance offsets the interest charged on your loan daily. If you have a $500,000 loan and $30,000 in your offset account, you're charged interest on $470,000. For nurses managing a holiday home that generates seasonal income, an offset account allows you to deposit rental payments as they arrive and reduce your loan interest immediately, without making extra repayments that you can't easily access if you need the funds for repairs or rates.
Not all home loan products offer a full 100 percent offset. Some lenders offer partial offset accounts where only a portion of the balance reduces your interest. When you're comparing loan options for a holiday home purchase, confirm that the offset is full and that it's linked to both the variable portion of the loan if you're splitting, and confirm there's no monthly account-keeping fee that erodes the benefit for smaller balances.
Borrowing Capacity and Serviceability for a Second Property
Lenders assess your ability to service a holiday home loan by adding the new repayment to your existing commitments and testing the total against your income. If you already own your primary residence with a mortgage, the lender will include that repayment in their calculation, along with any car loans, credit card limits, and personal loans. They'll assess the new loan at a rate at least 3.0 percentage points above the actual product rate, which means even if you're borrowing at 6.5 percent, they'll test your ability to service the loan at 9.5 percent or higher.
Rental income from the holiday home is included in the assessment, but it's shaded at 80 percent to account for vacancy, management fees, and maintenance. If the property generates $600 per week in rent, the lender will assess $480 per week as usable income. That shading, combined with the serviceability buffer, often means your borrowing capacity for a second property is lower than you'd expect based on the actual rental yield and actual interest rate.
How First Home Buyer Concessions Apply to Holiday Homes
First home buyer concessions, including the First Home Owner Grant and stamp duty relief, are not available for holiday homes. These concessions require the property to be your principal place of residence, and a holiday home by definition is not your primary residence. If you're a first home buyer and you're choosing between purchasing your primary residence and purchasing a holiday home as your first property, you'll forfeit access to state and territory grants and duty exemptions if you proceed with the holiday home first.
The Australian Government 5% Deposit Scheme is similarly restricted to owner-occupied purchases for first home buyers. You cannot use the scheme to purchase an investment property or a holiday home, even if you intend to occupy the property occasionally. If you're weighing your options and the deposit is the constraining factor, structuring your first purchase as an owner-occupied property and accessing the scheme may be the more practical path, with a holiday home or investment property following once you've built equity in your primary residence.
Tax Treatment of Holiday Home Expenses and Rental Income
If you're renting out your holiday home for any part of the year, you'll declare that rental income in your tax return and claim a proportional deduction for expenses including interest, council rates, insurance, repairs, and depreciation. The Australian Taxation Office applies an apportionment formula based on the number of days the property was rented, the number of days it was available for rent, and the number of days you used it personally.
As an example, if your holiday home was rented for 180 days, available but not rented for 60 days, and used personally for 30 days, you can claim deductions for the 240 days it was income-producing (rented or available for rent), but not for the 30 days of personal use. Interest deductions, which are often the largest expense, are apportioned on the same basis. Under current tax law, losses from established residential investment properties purchased after 12 May 2026 can only be offset against other residential property income from the 2027-28 income year onward. If your holiday home is an established property and it runs at a loss after apportionment, you won't be able to deduct that loss against your nursing salary under the revised negative gearing rules.
If the property qualifies as a new build, losses remain fully deductible against all income, including your salary. This distinction can materially affect the after-tax cost of holding a holiday home, and it's worth modelling both scenarios with your accountant before you commit to a purchase.
Structuring the Deposit and Using Equity from Your Primary Residence
Most nurses purchasing a holiday home use a combination of savings and equity from their primary residence to fund the deposit. If you've owned your home for several years and the property has increased in value, you may have accessible equity that can be used as a deposit for the second purchase without selling any assets. Lenders will allow you to borrow up to 80 percent of your primary residence's value, and the difference between that figure and your current loan balance is your available equity.
If your home is valued at $800,000 and your current loan balance is $450,000, you have $190,000 in accessible equity at 80 percent LVR ($640,000 minus $450,000). That equity can be used as the deposit on a holiday home, and in many cases it removes the need to save a separate cash deposit. The lender will establish a split loan or line of credit against your primary residence, and the funds are drawn down at settlement of the holiday home purchase. You'll be servicing two loans, one secured against your home and one secured against the holiday home, but you're not required to sell or disturb your living arrangements.
This approach works when your income supports the combined servicing requirement. If your base salary plus any rental income from the holiday home doesn't meet the lender's buffered assessment, you may need to reduce the purchase price, increase the deposit from savings, or wait until your income rises before proceeding.
Selling a Holiday Home and Capital Gains Tax
When you sell a holiday home that's been used to generate rental income, you'll be liable for capital gains tax on the profit. The gain is calculated as the difference between the sale price and the original purchase price plus buying and selling costs, and under current law the tax treatment depends on when you purchased the property. For properties held at 12 May 2026, the existing 50 percent CGT discount continues to apply to gains accruing up to 1 July 2027. From 1 July 2027, gains are subject to cost base indexation and a 30 percent minimum tax rate.
If you've used the property for both personal holidays and rental income, the ATO applies a formula to apportion the capital gain between the income-producing period and the personal use period. The portion of the gain attributable to personal use may be exempt under the main residence exemption if you've elected to treat the holiday home as your main residence for part of the ownership period, though this election has specific time limits and you cannot claim the main residence exemption on two properties simultaneously. These rules are detailed and the tax outcome can vary significantly depending on your usage pattern and election history, so speak with a tax adviser before listing the property for sale.
Call one of our team or book an appointment at a time that works for you. We'll compare home loan options from lenders across Australia, structure the loan to suit your roster, and make sure you're accessing any LMI waiver or rate discount available to nurses.
Frequently Asked Questions
Can I use an LMI waiver to purchase a holiday home?
Yes, the LMI waivers available to registered nurses through lenders like Westpac, St.George, and Bank of Melbourne apply to investment properties including holiday homes, provided the property is not a serviced apartment or commercially managed tourist product. You'll need a minimum income of $90,000 and current AHPRA registration to access the 90 percent LVR waiver.
Should I structure a holiday home loan as fixed, variable, or split?
A split loan structure is often the most practical for nurses managing a holiday home. You can fix part of the loan for repayment certainty and link an offset account to the variable portion, allowing you to deposit rental income and reduce interest in real time without locking funds away.
How do lenders assess rental income from a holiday home?
Lenders assess rental income from a holiday home at 80 percent of the stated amount to account for vacancy, management fees, and maintenance costs. If the property generates $600 per week in rent, the lender will assess $480 per week as usable income when calculating your borrowing capacity.
Can I claim tax deductions on a holiday home I use personally?
You can claim tax deductions for the period the property was rented or available for rent, but not for days you used it personally. The ATO applies an apportionment formula based on the number of days the property was income-producing versus personal use.
Can I use equity from my primary residence as a deposit for a holiday home?
Yes, if you've built equity in your primary residence, you can borrow up to 80 percent of its value and use the difference between that figure and your current loan balance as a deposit for a holiday home. The lender will establish a split loan or line of credit against your home, and the funds are drawn down at settlement.
