Unlock the secrets to investment property deposits

Most lenders want at least 20 per cent of the property value as a deposit to avoid Lenders Mortgage Insurance, but the real number depends on whether you're using cash, equity, or a combination of both.

How much deposit do you need for an investment loan?

You need a minimum deposit of 10 per cent for most investment property loans, though 20 per cent is the threshold that avoids LMI. Some lenders allow you to borrow at 90 per cent LVR if you're prepared to pay the insurance premium, which is calculated on a sliding scale based on loan size and LVR. The premium is a one-off cost added to your loan or paid upfront, and it can run into tens of thousands of dollars depending on the property value and how much you're borrowing.

Consider a buyer looking to purchase an investment property using a 10 per cent cash deposit. If they borrow at 90 per cent LVR, the lender will require LMI to cover the additional risk. That premium becomes a claimable expense over five years for tax purposes, but it still adds to the upfront or capitalised cost. Most investors we work with prefer to structure the loan at 80 per cent LVR where possible, either by increasing the cash deposit or by drawing on equity from another property.

Using equity as your deposit

Equity in an existing property can replace or supplement a cash deposit. If you own a home or another investment property with available equity, you can leverage that equity to fund the deposit and sometimes the full purchase without needing cash savings. Lenders assess equity by taking the current market value of the property, subtracting what you owe, and then applying their lending cap, which is typically 80 per cent of the property value for most investment scenarios.

In a scenario where you own a property valued at $700,000 with a remaining loan balance of $300,000, your total equity is $400,000. At 80 per cent LVR across the security, the lender allows you to borrow up to $560,000 in total. Subtract the existing $300,000 loan and you have access to $260,000 in usable equity. That amount can cover a deposit, stamp duty, and other acquisition costs without touching your savings. Stamp duty varies by state and can represent a significant portion of your upfront costs, so factoring it into your equity calculation is important.

When you use equity to fund an investment purchase, the portion of interest attributed to the investment remains tax deductible, but only if the funds are genuinely used to acquire or improve the investment property. Mixing purposes dilutes the deduction, so most investors split their loans to keep the investment component quarantined. You can read more about loan structures that preserve deductibility in our article on interest-only construction loans.

What counts as genuine savings?

Some lenders distinguish between equity and cash when assessing your deposit, particularly if you're borrowing above 80 per cent LVR. Genuine savings are funds held in your name for at least three months in a standard savings account, term deposit, or offset account. Windfalls such as tax refunds, bonuses, or gifted funds may not qualify unless they've been held long enough or are accompanied by a statutory declaration. Equity does not count as genuine savings, even though it can be used as a deposit.

For buyers borrowing at higher LVRs, lenders typically want to see at least 5 per cent of the property value in genuine savings. The reasoning is that demonstrated savings behaviour indicates financial discipline, which correlates with lower default risk. If you're using 100 per cent equity and no cash, some lenders will waive the genuine savings requirement, but others will not. It depends on your overall profile, including income stability, existing debt, and the type of property you're purchasing.

LVR limits and debt-to-income caps

From 1 February 2026, lenders have been required to limit high debt-to-income lending under rules set by APRA. Each lender can provide no more than 20 per cent of new investment loans to borrowers with a total DTI ratio of six times or greater. If your total borrowings across all properties, including the new loan, exceed six times your gross annual income, you may find fewer lenders willing to approve your application, even if you meet serviceability and LVR requirements.

The rule applies separately to investor and owner-occupier lending, so your investment loan is measured within the investor pool. Non-bank lenders are not currently subject to the cap, which gives them more flexibility in some cases, though their rates and fees may differ. Serviceability is still tested at the loan product rate plus a 3 percentage point buffer, meaning your income needs to support repayments at a rate well above what you'll actually pay. If you're planning to use equity release from multiple properties to fund a new purchase, the combined debt load will be factored into both the DTI and serviceability calculations.

Investment deposits and portfolio strategy

The deposit you put down affects more than just whether the loan is approved. It determines your ongoing cash flow, your ability to access equity later, and how much capital growth you need before you can refinance or purchase again. Borrowing at 90 per cent LVR maximises your leverage but leaves little equity buffer if property values stagnate or fall. Borrowing at 80 per cent gives you a margin for market movement and typically qualifies you for better rates.

Investors building a portfolio often alternate between high and low LVR purchases depending on their equity position and cash reserves at the time. The first property might be purchased with a 20 per cent cash deposit, then once it appreciates, the equity is used to fund the deposit on a second property at 80 or 85 per cent LVR. Over time, the compounding effect of leverage and rental income supports further acquisitions, but only if each loan is structured to maintain tax deductions and preserve borrowing capacity. You can explore related structures in our guide to dual income property loans.

Rental income from the investment property is included in your serviceability assessment, but lenders typically shade it by 20 per cent to account for vacancy, maintenance, and periods without a tenant. If the property generates $30,000 in annual rent, the lender will assess your income as though it's $24,000. That shading can reduce your borrowing capacity, particularly if you're relying on rental income to service the new loan.

What happens if you don't have enough deposit?

If you lack sufficient cash or equity, your options narrow but don't disappear. Family guarantees allow a parent or family member to use their property as additional security, reducing the LVR on your loan and potentially removing the need for LMI. The guarantor does not hand over cash but offers their equity as a safety net for the lender. Once you've paid down enough of the loan or the property has grown in value, the guarantee can often be removed. More detail is available in our article on family guarantee granny flat loans.

Another option is to delay the purchase and build your deposit over time, either by saving more or by waiting for equity in an existing property to grow. Some investors also consider selling an underperforming asset to release capital, though this triggers CGT and should be weighed carefully. Refinancing an existing loan to access equity without selling is often the more tax-effective path, particularly if the property has appreciated since purchase. Our refinance to fund a granny flat page covers how refinancing can unlock usable equity without triggering a disposal event.

Call one of our team or book an appointment at a time that works for you. We'll review your equity position, your borrowing capacity, and the deposit options that fit your circumstances, whether you're buying your first investment property or adding to an existing portfolio.

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