One of the first questions new property investors ask is: how much deposit do I actually need? The answer depends on the lender, the property, and your overall financial position — but this guide covers the key numbers and options you need to know.
The minimum deposit: 10–20%
Most Australian lenders require a minimum 10% deposit for an investment property loan. However, if your deposit is less than 20% of the purchase price, you’ll almost certainly need to pay Lenders Mortgage Insurance (LMI). LMI protects the lender (not you) in case you default on the loan, and the cost is passed on to the borrower. Depending on the loan size and deposit amount, LMI can range from a few thousand dollars to over $20,000 — so it’s a real cost to factor in.
A 20% deposit avoids LMI entirely and also gives you access to a wider range of loan products and better interest rates. For a $600,000 investment property in Australia, that means a $120,000 deposit plus buying costs — which is a significant hurdle for first-time investors.
Using equity instead of cash
Many property investors don’t save a separate deposit in cash — they use the equity in their existing home. If your home is worth $800,000 and you owe $400,000, you have $400,000 in equity. Most lenders will let you access up to 80% of your home’s value minus what you owe — in this case, $640,000 minus $400,000 = $240,000 in usable equity. This can be used as the deposit (and sometimes the purchase costs) on an investment property without needing to save separately.
Using equity is common and legitimate, but it does mean you’re increasing your total debt exposure. If both properties fall in value at the same time, you could find yourself in a difficult position. Make sure you’re stress-testing your borrowing capacity against higher interest rates before going down this path.
What about buying costs on top of the deposit?
The deposit is just part of the upfront cash requirement. On top of the deposit, you’ll typically need to cover: stamp duty (the largest cost — varies by state and property value), conveyancing and legal fees ($1,500–$3,000), building and pest inspection ($400–$800), loan establishment and valuation fees ($500–$1,000), and landlord insurance for the first year. In total, buying costs in Australia typically add 3–5% to the purchase price on top of your deposit.
How lenders assess investment loan applications
Having a sufficient deposit is necessary but not sufficient. Lenders also look at your income (wages, rental income, dividends), your existing debts and commitments, your living expenses, your credit history, and the rental income potential of the property you’re buying. Most lenders will only count 70–80% of the projected rental income in their assessment. And they’ll stress-test your repayments at a rate 2–3% higher than the actual rate. This is why some investors find their borrowing capacity lower than expected even with a solid deposit.
Can you use a guarantor for an investment property?
Guarantor loans — where a family member uses their own property as additional security — are primarily used for owner-occupied purchases. They’re less commonly available for investment loans, and most lenders don’t offer them for this purpose. If you’re exploring this option, speak directly with a mortgage broker who specialises in investor lending.
Bottom line
The practical minimum for most investors is 10% deposit plus buying costs — but 20% is significantly better in terms of avoiding LMI and accessing better loan terms. If you’re using equity, make sure you understand how it affects your total exposure. For the full picture of what’s involved in the purchase process, see our guide on how to buy an investment property in Australia.
General Advice Warning: This article is general in nature and does not constitute personal financial advice. Please consult a licensed financial adviser before making investment decisions.
