Understanding the basics of investment property deposits

How Much Deposit Do You Need for an Investment Property?

Most lenders require a minimum 10 per cent deposit for an investment loan, though borrowing at that level triggers Lenders Mortgage Insurance and limits your product choice. A 20 per cent deposit avoids LMI and unlocks wider investment loan products, including options with offset accounts and rate discounts that can materially affect portfolio performance over time.

The exact deposit you need depends on whether you are funding from cash savings, equity in your home, or a combination. Lenders calculate the loan to value ratio by dividing your proposed loan amount by the property's purchase price or valuation, whichever is lower. At 90 per cent LVR, you are borrowing against most of the asset's value and the lender is pricing that risk through both higher rates and insurance premiums. At 80 per cent LVR, you remove the insurance cost and access sharper pricing.

Consider a scenario where you are acquiring an investment unit in Windsor. You have $80,000 in offset against your owner-occupied home and want to preserve that buffer while still entering the market. Rather than drawing all cash, you might structure the purchase with a 10 per cent cash deposit and use equity in your existing property to reduce the LVR on the investment loan to 85 per cent, avoiding the highest LMI band while keeping liquidity intact. The deposit composition matters as much as the headline percentage.

Can You Use Equity Instead of Cash?

You can use equity in your home or another investment property as security for a deposit, either fully or in part. When you leverage equity, the lender registers a mortgage over both properties and assesses serviceability across your combined borrowing. The benefit is that you retain cash reserves for settlement costs, renovations, or to cover holding expenses during vacancies.

Lenders calculate usable equity by taking 80 per cent of your property's current value, subtracting what you owe, and applying their credit policy to the residual. If your home is worth $850,000 and you owe $420,000, you have up to $260,000 in accessible equity before entering LMI territory. Not all of that equity will be approved; the lender applies a serviceability test that includes the new investment loan repayment, existing debts, and a buffer of three percentage points above the rate you will actually pay.

We regularly see buyers underestimate how servicing constraints limit their usable equity. Borrowing capacity is not just about what you own but what you can prove you can repay under stress conditions. A second investment property or a jump in body corporate fees can reduce headroom faster than the equity release itself expands it.

What Costs Sit Outside the Deposit?

Deposit is not the only upfront outlay. Stamp duty in Queensland is calculated on a sliding scale and is not tax deductible for investment properties. Legal fees, building and pest inspections, and lender application fees add another layer. If you are buying in a complex with a body corporate, expect to pay the seller's share of levies pro rata at settlement.

LMI is the most significant additional cost when borrowing above 80 per cent LVR. The premium is calculated on a matrix that considers both LVR and loan size, and it can range from a few thousand to over $30,000 depending on how much you borrow. Unlike mortgage protection insurance, LMI protects the lender if you default, not you. It is a one-off cost that can be capitalised into the loan, though doing so increases your loan amount and your ongoing repayment.

If you are refinancing an investment loan or purchasing additional properties, the accumulated LMI across your portfolio compounds quickly. Some lenders waive LMI for certain professions or offer tiered pricing if you have a strong deposit and employment history. Those variances are not advertised and require direct negotiation or broker access to uncover.

How Do Rental Income and Negative Gearing Affect Your Borrowing?

Lenders assess your ability to service the investment loan by including forecast rental income, typically shaded to 80 per cent of market rent to account for vacancy, management fees, and periods between tenancies. That shading reduces how much income the lender credits you with, which in turn reduces how much you can borrow.

For properties acquired after 7:30pm AEST on 12 May 2026, rental losses are quarantined from 1 July 2027 under the Treasury Laws Amendment (Tax Reform No. 1) Act 2026. You can still carry those losses forward to offset future rental income or capital gains on residential property, but you cannot use them to reduce tax on your salary. Grandfathered properties purchased before that date retain full negative gearing treatment, which affects their relative value when you compare an established investment near the CBD with a new build in the outer suburbs.

Eligible new residential dwellings remain fully negatively gearable regardless of purchase date, provided they are built on previously vacant land or increase the dwelling count on the site. A knock-down rebuild that replaces one house with one house does not qualify. If a new build is occupied for more than 12 months before you purchase it as an investor, it loses the exemption in your hands.

What Happens When You Are Structuring Multiple Properties?

Once you hold more than one investment property, lenders aggregate your portfolio and apply the APRA debt-to-income cap. From 1 February 2026, lenders can extend no more than 20 per cent of new investor loans at a DTI of six times gross income or above. If your total borrowing across home and investment loans pushes you into that top band, some lenders will decline your application outright while others retain discretion for strong applicants with low LVR and stable employment.

The cap is measured at portfolio level, so even if your new loan on its own sits under six times income, your combined debt might exceed it. That ceiling has redirected how deposits are allocated. Instead of maximising leverage on each property, portfolio investors now structure earlier purchases at lower LVR to preserve serviceability headroom for subsequent acquisitions.

We regularly see scenarios where a buyer with $200,000 in usable equity splits that across two properties at 85 per cent LVR rather than putting it all into one at 90 per cent, purely to keep the blended DTI under the threshold and retain the ability to add a third property within 24 months.

How Does the Deposit Requirement Change for New Builds?

Some lenders offer concessional LVR treatment for new or newly completed dwellings, allowing you to borrow up to 90 per cent without LMI or with reduced premiums. The definition of what qualifies varies by lender. Most require the property to be completed within 12 months of purchase or never previously occupied.

New builds also sit outside the DTI cap where the finance is for construction or purchase of a newly erected dwelling as defined under APS 220. That carve-out has made new apartments and townhouses in growth corridors more accessible from a serviceability perspective than equivalent established stock, even when the purchase price is identical.

Brisbane's northern suburbs have seen increased supply of new townhouses and low-rise units designed to meet both the Build-to-Rent incentive criteria and the investor appetite for properties that retain negative gearing and CGT treatment under the new regime. The deposit quantum does not change, but the lending parameters around it do.

What Documentation Do Lenders Require Alongside Your Deposit?

You will need to evidence your deposit source. If funds come from savings, lenders want three months of statements showing genuine accumulation. Large one-off credits trigger questions about gifted funds or undisclosed liabilities. If you are using equity, a valuation of the security property is required, either desktop or physical depending on location and lender appetite.

Rental appraisals from a licensed property manager are required to support income assumptions. Some lenders accept online estimates; others insist on a signed letter. The difference in assessed rent between a conservative agent and an optimistic one can reduce your borrowing capacity by tens of thousands.

Contract of sale, building and pest reports, and strata records are standard. If the property is tenanted at the time of purchase, the lender will want a copy of the lease and evidence of bond lodgement. For properties in buildings with known cladding, structural, or defect issues, some lenders will decline security outright regardless of LVR, so knowing your target property's building profile before you commit a deposit protects you from wasted application effort.

Investment property deposits are about structure, timing, and knowing which lender will support your specific scenario. Call one of our team or book an appointment at a time that works for you.

Frequently Asked Questions