How much deposit do I need for an investment property?

The direct answer

Most lenders require a minimum 10% deposit for an investment property, though 20% avoids lenders mortgage insurance. Some lenders accept 5% for investors, but LMI costs are higher on investment loans. If you already own a home, you may be able to use your existing equity instead of cash savings.

Minimum deposit requirements by lender type

The major banks generally require a minimum 10% deposit (90% LVR) for investment purchases, with LMI payable above 80% LVR. Some specialist and non-bank lenders will lend up to 95% LVR on investment loans, but the LMI premium at that level is considerably higher than on an owner-occupied loan at the same LVR.

A 20% deposit (80% LVR) is the cleanest outcome - no LMI, the widest choice of lenders, and access to the most competitive rates. If you are between 10% and 20%, you are paying LMI but still have good lender choice. Below 10%, options narrow significantly and the cost structure becomes harder to justify for most investors.

LMI on investment loans - higher than owner-occupied

Lenders Mortgage Insurance (LMI) premiums on investment loans are meaningfully higher than on equivalent owner-occupied loans. At 90% LVR, the LMI premium on a $600,000 investment loan can be $10,000 to $15,000 more than the same loan for an owner-occupier. This is because lenders statistically view investment loans as higher risk.

LMI on an investment loan can also be capitalised onto the loan balance rather than paid upfront, but that means you are paying interest on it for the life of the loan. Run the numbers carefully before choosing that path.

Using equity from your existing home as a deposit

If you already own a home and have built up equity, you may not need cash savings at all. Most lenders will allow you to borrow up to 80% of your home's current value. The gap between your existing loan balance and 80% of the value is your usable equity. That equity can be accessed as a separate loan split and used as the deposit and costs for your investment purchase.

For example, if your home is worth $800,000 and you owe $400,000, your usable equity is $240,000 (80% of $800,000 minus $400,000). That is more than enough to fund a 20% deposit on a $700,000 investment property plus stamp duty and costs, without touching your savings.

Additional costs investors need to budget for

Beyond the deposit, investment property buyers need to budget for stamp duty (which applies in full - there are no first home concessions), conveyancing and legal fees, building and pest inspections, and any immediate maintenance or repairs. In South Australia, stamp duty on a $600,000 investment property is approximately $26,000.

A cash buffer of at least 2-3 months of holding costs is also sensible. Vacancy periods, unexpected repairs, and rate rises can all put pressure on your cash flow. A buffer gives you breathing room without needing to touch the investment property loan itself.

Common questions

Frequently asked questions

Can I use a 5% deposit for an investment property?

Some lenders will accept a 5% deposit for an investment loan, but the LMI premium is significantly higher than for owner-occupied loans at the same deposit level. Most investors find that 10-20% is a more practical target to keep costs manageable.

Is LMI more expensive on investment loans?

Yes - lenders charge higher LMI premiums on investment loans compared to owner-occupied loans at the same LVR. The difference can be several thousand dollars. LMI on investment loans is also not tax deductible in the same straightforward way as the loan interest itself - check with your accountant.

Can I use equity in my home as the deposit for an investment property?

Yes. If you have usable equity in your existing home - the difference between 80% of its value and your current loan balance - you can use that as the deposit and costs for an investment purchase. This is one of the most common ways investors get started without needing cash savings.

What other costs do I need to budget for beyond the deposit?

Stamp duty is the largest additional cost and applies in full on investment properties (no first home concessions). You also need to budget for conveyancing fees ($1,000 to $2,000), building and pest inspection ($500 to $800), loan establishment fees, and a cash buffer for any initial repairs or vacancy periods.

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The information on this page is general in nature and does not constitute financial advice. Given Finance Pty Ltd (t/a Lendology) ACN 624 144 501 is authorised under LMG Broker Services Pty Ltd ACL 517192.