It’s one of the first questions we hear from clients looking to buy their first investment property: how much do you actually need to get started?
The simple answer is 20%.
But in reality, it’s not always that straightforward. Depending on your position, there may be ways to enter the market sooner, without needing to save the full 20% in cash.
In this guide, we break down how investment property deposits work in Australia, what lenders are looking for in 2026, and the key strategies worth considering.
The 20% Deposit Rule (And Why It Exists)
Most lenders prefer a 20% deposit for an investment property. This gives you an 80% loan-to-value ratio (LVR), which is generally where lending becomes more straightforward.
Investment lending is viewed as higher risk compared to owner-occupied loans. If a borrower runs into financial difficulty, the investment property is typically the first to be sold. Because of this, lenders tend to apply:
- Higher interest rates
- Tighter lending criteria
- Larger deposit requirements
Here’s what a 20% deposit looks like:
- $500,000 property → $100,000 deposit
- $700,000 property → $140,000 deposit
- $900,000 property → $180,000 deposit
It’s important to note that this only covers the deposit.
You’ll also need to allow for stamp duty, legal fees, inspections, and a buffer. On a $700,000 purchase in NSW, this can add another $25,000 to $35,000 depending on your situation.
Can You Buy with Less Than 20%?
Yes, but there are trade-offs.
Some lenders will accept a 10% deposit. A smaller number may go higher than this, but those scenarios are less common and typically require a very strong financial profile.
If your deposit is below 20%, you will usually need to pay Lenders Mortgage Insurance (LMI).
LMI protects the lender, not the borrower, and it can be a significant cost. On a $700,000 property with a 10% deposit, the premium can run into the tens of thousands.
This cost can be added to your loan, but it means paying interest on it over time.
That said, it can still be a worthwhile strategy. Entering the market earlier, particularly in a rising market, can outweigh the cost of LMI. The key is understanding the numbers and making a clear, informed decision.
Using Equity Instead of a Cash Deposit
For many homeowners, this is the most effective way to get into the investment market.
If you already own a property, you may have built up equity as your property value has increased and your loan has reduced. That equity can often be accessed and used as the deposit for your next purchase.
For example:
- Property value: $900,000
- Loan balance: $500,000
- Usable equity (up to 80% LVR): approximately $220,000
This can be enough to fund a full deposit and associated costs without needing to save additional cash.
Typically, this is done through:
- A cash-out refinance, or
- A separate equity loan
The way this is structured is important, particularly from a tax and cash flow perspective, so it’s worth getting the setup right from the start.
What Lenders Actually Assess
Having a deposit is just one part of the equation.
Lenders will also assess:
Serviceability
Repayments are assessed at a buffer rate, usually around 3% higher than the actual interest rate. Rental income is included, but generally reduced to allow for vacancy periods.
Credit profile
A clean credit history is important, especially for investment lending where the perceived risk is higher.
The property itself
Location, property type, and market conditions all play a role. Certain properties, such as small apartments or those in regional areas, can limit lender options.
Don’t Forget the Upfront Costs
It’s easy to focus on the deposit, but there are several additional costs to consider:
- Stamp duty
- Conveyancing and legal fees
- Building and pest inspections
- Loan establishment costs
- Landlord insurance
- Property management setup
In NSW, stamp duty alone on a $700,000 investment property is typically around $26,000 to $27,000.
Unlike owner-occupied purchases, there are no first home buyer exemptions for investment properties.
So What’s the Right Deposit?
The right approach depends on your situation.
If you’re saving from scratch, a 20% deposit plus costs is the most straightforward option. It generally results in a lower interest rate and avoids LMI.
If you already own a home, using equity may allow you to move forward much sooner without needing to build up additional savings.
And if you’re considering a smaller deposit, it’s worth weighing up the cost of LMI against the potential benefits of entering the market earlier.
We Can Help You Make the Right Move
If you’re considering buying, investing, relocating or refinancing on the Central Coast, we’re here to help you map out your next steps with clarity and confidence.
At Shoreline Lending, we specialise in guiding Central Coast homeowners and families through every stage of their lending journey, with a relaxed approach and expert advice.
Book your free home loan strategy session no pressure, just expert guidance.
Not ready to book? Contact us anytime and we’ll happily help answer your questions.