Key Takeaways
- On an illustrative $800,000 purchase, the deposit runs from around $80,000 at a 90% loan to value ratio (LVR) to $160,000 at 80%, before duty and costs.
- Lenders mortgage insurance (LMI) is priced in bands, so stepping back from 90% to around 88% LVR moves the same loan into a cheaper band.
- Transfer duty on an $800,000 New South Wales purchase is $30,187 under the 2026-27 Revenue NSW schedule, and lenders will not fund it inside the investment loan.
- Equity in a property you already own can replace the cash deposit, though it faces the same serviceability test savings would.
Ask how much deposit you need for an investment property and the answer comes back as 20%. Round, safe and often wrong for the person asking. Lenders commonly go to around 90% loan to value ratio (LVR) on investment lending, lenders mortgage insurance (LMI) is priced in tiers instead of charged as a flat fee, and the deposit is only one of the cheques due at settlement.
The narrower question is which deposit level puts you in the market soonest without costing more than the wait would have.
Two years spent saving the last 5% is two years of rent and any growth you did not receive, and the 20% target moves with the price while you save. Setting each tier against the premium and the entry costs attached to it turns a savings goal into a date, and that comparison is the first thing an investment property loan broker puts on paper.
Where the 80% Line Sits and What Crossing It Costs
The line sits at 80% of the lender’s valuation, not 80% of the price you agreed to pay. Borrow $640,000 against an $800,000 valuation and the LVR is 80%, so the tier you borrow at sets the deposit almost mechanically.
Below that line, most lenders stop requiring LMI, a one-off premium covering the lender where a loan defaults and the sale does not clear the debt. You pay for it, the lender is protected by it and the insurer can still pursue you for what it paid out.
The insurers behind most Australian LMI, mainly Helia, QBE and Arch, price from schedules that step up at LVR bands instead of rising in a smooth curve, which is why the distance between an 88% loan and a 90% loan costs more than the 2% suggests. The higher rate applies to a larger loan, and the loan has crossed into a dearer band.
Investment lending is priced above owner-occupied lending at the same LVR, and a few lenders apply LMI to investment loans below 80%. Maximum investment LVRs are set by each lender, commonly around 90% including a capitalised premium, and they move with appetite.
Deposit at Each Tier on an $800,000 Purchase
Each route below assumes the same $800,000 purchase and a valuation that matches the price:
Deposit Set at Around 90% LVR
A $720,000 loan needs around $80,000 in cash. The premium sits in the dearest band most investors encounter, and most lenders will capitalise it, adding it to the loan instead of taking it at settlement. That keeps the cheque small and means paying interest on the premium for the life of the loan.
Deposit Set at Around 88% LVR
A $704,000 loan needs around $96,000. The extra $16,000 of savings usually buys a lower premium band applied to a smaller balance, which is why the high 80s is the tier worth pricing before you settle on 90%. Where each band starts differs between insurers and lenders, so the size of the step is a question to put to your lender before you fix the savings target.
Deposit Set at 80% LVR
A $640,000 loan needs $160,000 and attracts no premium. Pricing also tends to sharpen at or below 80%, since the lender carries less risk. The cost is the deposit itself, double the 90% figure, which for most savers is measured in years, not months.
Deposit Funded by Existing Equity
Lenders will typically release against your existing home to 80% of its value, less the balance still owing. Release enough to cover a 20% deposit plus entry costs, around $195,000 on this purchase, and the investment loan sits at 80% with no premium at all. How that release is structured decides whether the interest stays identifiable as investment interest, and the mechanics of using your existing equity are worth settling before the release is drawn.
Deposit Supported by a Family Guarantee
A parent or close family member can offer equity in their own property as additional security for the shortfall, which can remove the premium without the cash. The guarantor is exposed to the portion they secure, lender policies on who may act as guarantor are narrow, and releasing them later is a fresh credit decision that depends on the loan standing on the investment property alone.
Deposit Reduced by a Professional Waiver
Some lenders waive LMI up to 90% LVR for a defined list of occupations, most commonly medical and allied health practitioners, with wider lists reaching legal, accounting and finance roles. Where the waiver reaches an investment purchase, the $80,000 deposit at 90% LVR carries no premium at all. The occupations covered, the income levels required and whether the waiver applies beyond owner-occupied lending are set by each lender, so confirm it against your own occupation before counting on it.
Deposit amounts, premium bands and maximum LVRs differ by lender, insurer and borrower type, so treat the figures above as a general guide and confirm them against a current quote.
Cash That Sits Outside the Deposit
Lenders fund almost none of these, so each one comes out of your own cash:
Transfer Duty Paid to Revenue NSW
Duty on an $800,000 purchase in New South Wales is $30,187, calculated under the current transfer duty rates as $11,602 plus 4.5% of the amount above $387,000. First home concessions do not apply to investment purchases, duty is payable within three months of the contract date or at settlement if that comes first, and each state sets its own schedule and reviews it annually.
Conveyancing and Inspection Costs Paid Before Exchange
A conveyancer or solicitor, a building and pest inspection and a strata report where the property is strata titled commonly run to several thousand dollars together. None of it is refundable when a purchase falls over.
Lender Fees Charged at Application and Settlement
Application, valuation and settlement fees vary widely, and some lenders waive them on investment lending while others charge each one separately. Where a second valuation is ordered because the first came in low, that cost usually sits with you.
Council and Water Rates Adjusted at Settlement
Rates, water and strata levies the seller has already paid for the period after settlement are reimbursed to them on the day, so the adjustment is added to the funds you bring. The amount depends on the council, the levy cycle and where settlement falls in the billing period, and your conveyancer calculates it shortly beforehand.
Genuine Savings Held Before Approval
Many lenders apply a genuine savings test above 80% LVR, commonly around 5% of the purchase price accumulated or held over about three months. A lump sum that lands the week before an application can fail that test even where the total is ample, so the timing of a gift or a sale matters as much as the amount.
Cash Buffer Left After Settlement
Lenders look favourably on funds remaining once the purchase completes, and vacancies, repairs and rate movements are exactly what a buffer absorbs. Arriving at settlement with the account at zero reads poorly in assessment and leaves nothing between a broken hot water system and a credit card.
What Decides Whether Paying LMI Beats Waiting
LMI in isolation is a cost with nothing in it for you. The alternative is usually waiting, which also has a price:
Premium Band at Your Achievable LVR
The premium is a percentage of the loan that rises in steps, so the same 2% of deposit is worth far more at one point on the scale than another. Price the tier immediately below your target, not only the tier you can reach today.
Savings Timeline to 80%
Moving from an $80,000 deposit to $160,000 on this purchase means finding another $80,000. At $3,000 a month, a strong rate for most households, that is over two years of saving before anything else changes.
Market Movement Over the Saving Period
Where values rise over the period you spend saving, the deposit you were aiming for rises too, and the premium you avoided can be smaller than the increase in the entry price. Where values fall, waiting wins on both sides. Neither direction is knowable in advance, so it enters the comparison as an assumption you set.
Deductibility of the Premium on an Investment Loan
LMI on an investment loan is treated as a borrowing expense, which the Australian Taxation Office requires to be claimed over five years or the loan term, whichever is shorter, so it softens the cost in a way it never does on an owner-occupied loan. Separately, the Treasury Laws Amendment (Tax Reform No. 1) Act 2026 limits negative gearing on residential property to new builds from 1 July 2027, with properties held at 7:30 pm on 12 May 2026 grandfathered and further tranches of the rules still to be finalised, so the after-tax position of a geared purchase made now may differ from one made later.
Serviceability at the Larger Loan Amount
A smaller deposit means a larger loan, and the larger loan has to pass assessment at a rate well above the one you will pay. Where serviceability rather than savings is the binding constraint, paying a premium to borrow more does not help, because the extra borrowing was never available.
Assessment Rules That Cap the Loan Before Your Deposit Does
A deposit gets you to the table, and these rules decide what the lender will advance:
Serviceability Buffer Applied to Every Debt
The Australian Prudential Regulation Authority (APRA) confirmed on 28 May 2026 that the mortgage serviceability buffer stays at three percentage points, so repayments are tested at your rate plus three on the new loan, and usually on every existing debt as well. A property that is comfortably cash flow positive in life can assess as negative in the calculator.
Rental Income Shaded Before It Counts
Lenders count a portion of expected rent, commonly around 70% to 90%, treating the balance as an allowance for vacancy, agent fees, maintenance and insurance. The shading percentage is set by lender policy, not by regulation, which is why the same tenancy supports different loan sizes at different lenders.
Debt-to-Income Limit Imposed Since February 2026
Since 1 February 2026, APRA has limited banks and other authorised deposit-taking institutions to writing no more than 20% of new lending at a debt-to-income ratio of six times income or higher, measured quarterly and applied separately to owner-occupied and investment portfolios. High debt-to-income lending is rationed, not banned, so timing and lender choice matter for borrowers close to the line. Loans to buy or build a new dwelling are exempt from the cap, and non-bank lenders sit outside APRA’s remit entirely.
Living Expenses Benchmarked Against Your Declared Spending
Lenders compare the household expenses you declare against a published benchmark and assess on the higher of the two. Dependants, private school fees, childcare and credit card limits all push the assessed figure up, so two applicants on the same income with the same rent can be tested on very different living costs.
Maximum LVR Set by Each Lender
Beyond the regulatory rules, each lender sets its own ceiling on investment lending, decides whether the capitalised premium counts inside it, and excludes certain property types. High-density apartments, small studios and serviced apartments frequently attract a lower maximum than a standard house, which can raise the deposit for that property alone. Where existing loans already weigh on the result, your borrowing capacity can bind well before the deposit does.
Deposit Target That Matches Your Timeline
The answer was never one number. Around 10% plus a premium and costs gets you in soonest. The high 80s buys back most of the premium for another few months of saving. 20% removes the premium and sharpens the rate. Existing equity can retire the question entirely.
What decides between them is whether serviceability or deposit is actually holding you back, and how the premium at your reachable tier compares with the cost of the wait.
Where you are weighing up which deposit level to aim for, the team at DIY Lending can talk you through the options that suit your circumstances.
Frequently Asked Questions (FAQs)
1. Can I use a personal loan or credit card for the deposit?
Almost never. Lenders trace the source of deposit funds, and borrowed money used as a deposit both fails most genuine savings tests and adds a repayment to your assessment, reducing what you can borrow.
A documented gift from family is treated differently, usually needing a letter confirming it is not repayable, and some lenders will want it held for a period before settlement.
2. Does the deposit have to be paid in full at exchange?
The deposit paid at exchange is typically 10% of the price, though a vendor may accept 5% by negotiation, and it is separate from the total funds you contribute at settlement. A deposit bond or bank guarantee can bridge exchange where your cash is tied up in a sale settling later.
The full contribution, including the balance of your deposit, duty and costs, falls due at settlement.
3. Is the LMI premium refundable if I sell early?
Partial refunds are possible with some insurers where the loan is repaid inside the first year or two, and the conditions and window differ by insurer. Beyond that period, there is no refund, and refinancing to a new lender at above 80% usually means a fresh premium rather than a transfer of the old one.
4. How much deposit do I need for a second investment property?
The same LVR tiers apply, but the constraint usually shifts from deposit to serviceability, since the existing loan is assessed at your rate plus three percentage points while only part of the rent counts as income.
Equity released from the first property can supply the deposit for the second, which is why investors often reach the serviceability ceiling with deposit funds still available.
5. Does the suburb I buy in change the deposit I need?
It can. Lenders and the LMI insurers behind them keep internal lists of postcodes they treat as higher risk, typically CBD unit markets carrying heavy oversupply and towns resting on a single industry, and a lower maximum LVR in one of those postcodes raises the deposit for that purchase alone.
Those lists are not published, they differ between lenders and they are revised without notice, so the address is worth checking against a particular lender’s policy before you exchange.
6. What happens if the valuation comes in below the purchase price?
The lender lends against its valuation, not the contract price, so a shortfall lands on your deposit. On an $800,000 contract valued at $780,000, an 80% loan falls to $624,000 and the cash required rises by $16,000.
Options include making up the difference, moving to a higher LVR and accepting the premium, or asking your broker whether another lender’s valuer may reach a different figure.
This article is general information only. It does not take your objectives, financial situation or needs into account, and it is not a recommendation to act. Lender policies, LMI premiums, transfer duty rates and assessment rules referred to are current at the time of writing and may change, and the negative gearing and capital gains tax measures commencing 1 July 2027 remain subject to further guidance. You may wish to speak with a qualified professional, such as a licensed credit representative or a registered tax agent, before acting on anything set out here.