Australia
You can buy an investment property with a 10% deposit. But the cost of doing so is higher than most investors calculate — and for some, the financially better decision is waiting until they have 20%.
Understanding the deposit requirements for investment property loans before you start property shopping prevents the painful experience of having an offer accepted and then finding the financing doesn't stack up.
Minimum Deposit for Investment Property Loans
Most lenders set the maximum LVR for investment property loans at 90%, which means a minimum deposit of 10% of the purchase price. Some lenders restrict investment lending to 80% LVR — requiring 20% — particularly for investors with existing investment loans or in the current lending environment.
At 90% LVR, lenders mortgage insurance applies. LMI protects the lender, not you, if you default.
LVR limits vary by lender and are subject to individual assessment.
On a $750,000 investment property:
- 10% deposit = $75,000 cash, LMI applies
- 20% deposit = $150,000 cash, no LMI required
The question is not simply whether you have 10%. It is whether the cost of LMI at 10% is worth paying to buy now, versus saving for 20%.
LMI on Investment Loans Costs More Than Most Investors Expect
This is the number most investors don't check before applying.
LMI on investment property loans is more expensive than on owner-occupied loans at the same LVR. A 10% deposit on a $750,000 investment property typically attracts LMI of $18,000–$24,000, depending on the lender and their LMI provider. The equivalent cost on an owner-occupied purchase at the same LVR is typically $14,000–$18,000.
LMI is capitalised — added to the loan balance. You don't pay it upfront, but you pay interest on it for the life of the loan. At 7%, that $21,000 LMI premium costs approximately $1,470 per year in additional interest.
Fees and rates vary by lender and are subject to change — confirm current pricing with your broker.
Talk to Key Choice Lending about your options.
Key Choice Lending has access to 72+ lenders and has supported Australian borrowers through more than $1 billion in transactions. Founder Matthew Clark is a two-time Amazon bestselling author and Better Business Award winner. Book a Strategy Session — no obligation, focused on your situation.
Using Home Equity as Your Investment Deposit
Many property investors don't use cash savings for their investment deposit. They access equity in an existing property — typically their owner-occupied home — which is often more straightforward than accumulating cash.
Usable equity is calculated as 80% of your property's current value minus your existing loan balance.
Example: $950,000 home value × 80% = $760,000. Minus $420,000 existing mortgage = $340,000 in usable equity.
This equity can be released as a separate loan and used as the deposit and costs on the investment property. Done correctly, this creates a clean separation between your home loan and the investment loan — keeping tax-deductible debt clearly identified.
The structure matters. A top-up on your existing home loan mixes deductible and non-deductible debt in one account, which creates accounting complexity. A standalone equity release loan for the investment deposit avoids this problem and keeps records clean.
Tax treatment varies by individual circumstance — speak with your accountant before making any decisions based on tax considerations.
The Genuine Savings Requirement
Even when using equity, some lenders require genuine savings — typically 5% of the purchase price held in savings for at least 3 months — to demonstrate financial discipline.
For investment property applications:
- Equity in your existing home typically satisfies genuine savings requirements
- Rental income history can also satisfy the requirement for experienced investors
- Cash gifts from family members generally do not satisfy the requirement unless held in your account for the required period
Confirm genuine savings requirements with your specific lender before proceeding, as policies vary.
The Real Question: 10% or 20%?
On a $750,000 investment property at current rates, buying with 10% rather than 20% costs approximately $21,000 in LMI added to the loan. At 7% interest, that LMI adds roughly $1,470 per year to the interest cost.
If the property grows at 5% per annum, it increases in value by $37,500 in year one. Buying 12 months earlier captures $37,500 in growth in exchange for approximately $21,000 in LMI cost.
For many investors, the numbers favour moving sooner. For others — particularly those whose serviceability is already stretched, or who are funding the deposit from savings rather than equity — the 20% position is cleaner and reduces financial risk.
The Question to Ask Before You Apply
Ask your broker: does this lender use standard LMI, a Lender Protection Fee, or do they require 20% for investment loans? Some non-bank lenders use their own internal protection fee rather than a third-party LMI insurer. The cost structure differs, and in some cases is more favourable for investors with strong profiles.
Knowing the exact LMI cost at your specific LVR before you apply makes the 10% vs 20% decision straightforward.
Book a Strategy Session. Make the Move.
The information provided in this blog is for educational purposes only and should not be considered financial advice. Always consult with a professional financial advisor or lender for specific lending decisions.
