How Much Deposit for an Investment Property in Australia? (2026 Strategy Guide)

Low Deposit Options: 10% and 5% Strategies

If accumulating a 20% deposit feels out of reach, lower deposit options exist - but they come with trade-offs. In 2026's lending environment, these options require exceptional serviceability and strong credit profiles.

10% Deposit Investment Loans

Some lenders will approve investment property loans with deposits as low as 10%, though this requires:

• Excellent credit history (score typically 650+)
• Strong, stable employment (usually 2+ years in current role)
• Low existing debt levels
• Demonstrated savings discipline
• Sufficient income to service the larger loan
• Clear serviceability floor compliance (typically assessed at 8-9% interest rate)

Example: $650,000 Property with 10% Deposit

• Deposit: $65,000
• Loan amount: $585,000
• Loan-to-Value Ratio (LVR): 90%
• Lenders Mortgage Insurance: ~$18,500-$23,000
• Additional costs (stamp duty, etc.): ~$32,000
• Total upfront cash needed: ~$115,000-$120,000

While the deposit is half that of the 20% option, LMI adds substantial cost. However, total upfront capital is still lower, allowing you to enter the market sooner.

Important consideration: While capitalizing LMI preserves your cash flow today, it can add upwards of $40,000 in interest over the life of a 30-year loan at 6%. This is a long-term cost that sophisticated investors factor into their yield calculations.

5% Deposit: Extremely Rare for Investment Properties

While 5% deposits are available for owner-occupiers (particularly first home buyers under government schemes), investment property loans almost never permit deposits this low. Lenders view investment properties as higher risk than owner-occupied homes, and 95% LVR on investments is generally unavailable outside very exceptional circumstances.

However, non-conforming or second-tier lenders in 2026 occasionally offer 95% LVRs for investment properties—but at significantly higher interest rates (often 7-9% vs mainstream 6-6.5%). These products target investors with strong income but limited savings, though the higher rates severely impact cash flow and overall returns.

The Australian Government's First Home Guarantee scheme, expanded from October 2025, allows first home buyers to purchase with 5% deposits without LMI - but this applies only to properties you'll live in, not investment properties.

If you're considering very low deposits, your realistic path is to purchase an owner-occupied property first using these schemes, build equity through capital growth and principal repayments, then leverage that equity for investment property purchases down the track—a strategy often called rentvesting.

Understanding Lenders Mortgage Insurance (LMI)

Lenders Mortgage Insurance is often viewed by sophisticated investors as a "speed-to-market tax" rather than just a cost. It's the premium you pay when borrowing more than 80% of a property's value—one of the most significant decisions investors face when using low deposits.

What LMI Actually Is

Despite its name, LMI protects the lender, not you. If you default on the loan and the property sells for less than the outstanding debt, LMI covers the lender's loss. You remain liable for any shortfall.

LMI is a one-time cost, typically added to your loan amount rather than paid upfront (though you can pay it upfront if you prefer). This means you'll pay interest on the LMI premium over the life of your loan.

How Much Does LMI Cost?

LMI costs vary based on:

• Loan-to-Value Ratio (higher LVR = higher premium)
• Loan amount (larger loans = higher premium)
• Property type (houses vs units)
• Lender and insurer (different companies have different rates)

Approximate LMI costs for investment properties in 2026:

• $400,000 loan on $500,000 property (80% LVR): $0 (no LMI required)
• $450,000 loan on $500,000 property (90% LVR): ~$13,000-$16,500
• $475,000 loan on $500,000 property (95% LVR): ~$22,000-$28,000 (if available)
• $600,000 loan on $750,000 property (80% LVR): $0
• $675,000 loan on $750,000 property (90% LVR): ~$20,000-$25,000
• $800,000 loan on $1,000,000 property (80% LVR): $0
• $900,000 loan on $1,000,000 property (90% LVR): ~$27,000-$33,000

These costs can range from 1-6.5% of the loan amount depending on LVR. As you can see, LMI represents a substantial expense that directly impacts investment returns.

Is LMI Worth Paying?

Whether LMI makes sense depends on your individual circumstances and market conditions—specifically the yield vs. growth trade-off in your target market.

Arguments FOR paying LMI:

Earlier market entry: If property prices are rising 6-8% annually, entering the market 2-3 years earlier by paying LMI could result in substantial capital gains that far exceed the LMI cost.

Example: You need 2 more years to save for a 20% deposit on a $700,000 property. If prices rise 7% annually, that property will cost $800,000 in 2 years. You've "saved" $15,000 in LMI but the property now requires a $160,000 deposit instead of $140,000, plus the purchase price increased $100,000. You're arguably worse off waiting.

• Opportunity cost: Money sitting in savings accounts earning 3-4% interest could potentially earn 6-10%+ in property appreciation.
• Inflation hedge: Property ownership protects against inflation and rising rents.

Arguments AGAINST paying LMI:

• Dead money: LMI provides no benefit to you - it protects the lender. That $20,000 could be used for property improvements, emergency reserves, or alternative investments.
• Higher borrowing costs: A larger loan (including capitalized LMI) means higher interest costs over the loan term.
• Reduced equity buffer: Lower deposits mean less protection if property values fall.
• Higher servicing requirements: Larger loans require higher income to meet serviceability requirements.

There's no universal answer. In strong growth markets with clear appreciation trends (like Perth and Adelaide in 2025-2026), paying LMI to enter sooner often makes financial sense. In flat or uncertain markets (like Melbourne in recent years), waiting to accumulate a larger deposit may be prudent.

Using Equity from Your Existing Property

For investors who already own property (typically their home), using existing equity is often the fastest path to investment property purchase without needing to save additional cash deposits.

How Equity Access Works

Equity is the difference between your property's current value and the outstanding loan balance.

Example:

• Current home value: $800,000
• Outstanding mortgage: $400,000
• Available equity: $400,000

Lenders typically allow you to borrow up to 80% of your property's value. This means you can access equity up to:

$800,000 x 80% = $640,000
Less existing loan: $400,000
Accessible equity: $240,000

This $240,000 can be used as a deposit for investment property, allowing you to purchase without saving additional cash.

Real-World Example: Using Equity to Invest

Your situation:

• Home worth $850,000
• Mortgage owing $300,000
• Usable equity: ($850,000 x 80%) - $300,000 = $380,000

Investment purchase:

• Target property: $650,000
• Required deposit (20%): $130,000
• Additional costs: $35,000
• Total needed: $165,000

You have sufficient equity ($380,000) to:

• Fund the $130,000 deposit
• Cover the $35,000 additional costs
• Maintain a healthy equity buffer

Your post-purchase position:

• Home value: $850,000
• Total borrowing: $300,000 (existing) + $165,000 (equity access) + $520,000 (investment loan) = $985,000
• Total property value: $850,000 + $650,000 = $1,500,000
• Loan-to-Value Ratio: 65.7%

This strategy allows property purchase without cash savings, but increases your overall debt and requires sufficient income to service multiple loans.

Equity Strategy Considerations

Advantages:

• No need to save cash deposits
• Faster portfolio growth
• Leverage existing assets
• No LMI if staying under 80% LVR
• Interest on equity access may be tax-deductible

Risks:

• Higher overall debt levels
• Your home becomes security for investment property
• If investment property declines in value, your home equity is at risk
• Increased interest costs
• Requires strong income for serviceability and borrowing capacity

Using equity effectively can accelerate wealth creation, but it's crucial to maintain adequate buffers and avoid overleveraging. Many investors aim to keep total borrowing below 70-75% of combined property values to maintain financial flexibility.

State-Based Variations: Stamp Duty and Land Tax

Deposit requirements are similar across states, but stamp duty costs vary dramatically, affecting total upfront capital needs. In 2026, understanding Land Tax thresholds is equally critical, as this often influences where investors choose to deploy their deposit capital.

Stamp Duty Comparison (Investment Properties)

$650,000 Property:

• NSW: ~$26,000
• VIC: ~$35,000
• QLD: ~$23,000
• SA: ~$29,000
• WA: ~$24,000
• TAS: ~$25,000

These variations significantly impact required capital. A $650,000 investment in Victoria requires ~$9,000 more than Queensland due to stamp duty alone.

Land Tax Considerations (2026)

• NSW: $0 on first $1,075,000 (investment properties)
• VIC: $0 on first $300,000; progressive rates thereafter
• QLD: $0 on first $600,000; progressive rates thereafter
• SA: $0 on first $450,000; progressive rates thereafter
• WA: $0 on first $300,000; progressive rates thereafter

For investors building multi-property portfolios, Land Tax becomes a significant ongoing cost. Some investors prefer concentrating properties in QLD or NSW where thresholds are higher, while others diversify across states to maximize tax-free thresholds.

Investor Takeaway: Sophisticated investors often "border hop" their purchases to stay under these individual state thresholds, effectively multiplying their tax-free allowances. For example, holding two properties in NSW (under $1.075M total) and two in QLD (under $600k total) means potentially zero Land Tax across a $1.675M+ portfolio—versus thousands annually if concentrated in one state.

Comparing Deposit Scenarios: Real Numbers

Let's compare four different deposit scenarios for a $700,000 investment property in Brisbane (using QLD stamp duty of ~$25,000):

Scenario 1: 20% Deposit (Standard)

• Deposit: $140,000
• Stamp duty & costs: $30,000
• Loan amount: $560,000
• LMI: $0
• Total upfront cash: $170,000
• Monthly repayment (6.5% interest-only): $3,033
• Annual interest cost: $36,400

Scenario 2: 10% Deposit + LMI

• Deposit: $70,000
• Stamp duty & costs: $30,000
• LMI: ~$21,000
• Loan amount: $651,000 (includes capitalized LMI)
• Total upfront cash: $100,000
• Monthly repayment (6.5% interest-only): $3,527
• Annual interest cost: $42,315

Scenario 3: The $0-Cash Strategy (Leveraging Usable Equity)

• Cash deposit: $0
• Home equity accessed: $170,000
• Stamp duty & costs: $30,000 (from equity)
• Investment loan: $560,000
• LMI: $0
• Total upfront cash: $0
• Total borrowing increase: $730,000 ($170,000 equity + $560,000 investment loan)
• Combined monthly repayments: $3,950 (equity access) + $3,033 (investment) = $6,983

Scenario 4: 15% Deposit + LMI

• Deposit: $105,000
• Stamp duty & costs: $30,000
• LMI: ~$12,000
• Loan amount: $607,000 (includes capitalized LMI)
• Total upfront cash: $135,000
• Monthly repayment (6.5% interest-only): $3,288
• Annual interest cost: $39,455

Strategic Comparison of Entry Paths

Which Scenario Makes Sense?

Scenario 1 (20% deposit) offers lowest ongoing costs but requires most upfront cash. Ideal if you have savings and want to minimize interest expenses.

Scenario 2 (10% + LMI) enables earlier entry but significantly increases borrowing costs. Makes sense in rapidly appreciating markets where waiting is costly.

Scenario 3 (equity) requires no cash savings but doubles your debt servicing requirements. Suitable for high-income earners wanting to scale quickly.

Scenario 4 (15% + LMI) balances upfront cash and ongoing costs. Reasonable compromise if you have moderate savings.

Your optimal choice depends on savings available, income level, risk tolerance, and market conditions.

Common Deposit Mistakes to Avoid

Mistake 1: Depleting All Savings for Maximum Deposit

Don't invest every dollar into your deposit. Maintain emergency reserves for repairs, vacancies, and personal emergencies. Financial stress forces poor decisions like distressed property sales.

Mistake 2: Ignoring Total Upfront Costs

Deposit is only part of upfront costs. Stamp duty, legals, inspections, and reserves add 10-15% to required capital. Budget for total costs, not just deposit.

Remember: Stamp duty cannot be capitalized—you must have this cash upfront.

Mistake 3: Paying LMI for Poor Locations

LMI might make sense to enter strong growth markets sooner, but paying LMI to invest in mediocre locations compounds poor decision-making. Never let financing considerations override location fundamentals.

Mistake 4: Overleveraging with Equity

Using equity is powerful but risky if overdone. Maintain combined borrowing below 75% of total property values to preserve financial flexibility. Higher leverage amplifies both gains and losses.

Mistake 5: Not Shopping Around for LMI

If paying LMI, get quotes from multiple lenders. LMI costs vary significantly between lenders and insurers. Savings of $3,000-$5,000 are possible with proper comparison.

Mistake 6: Forgetting Tax Deductibility

Interest on borrowings used to purchase investment property is tax-deductible. This includes interest on LMI if capitalized. Factor tax benefits into your cash flow calculations - they improve the real cost picture significantly.

The Bottom Line: How Much Do You Really Need?

For most Australian investors in 2026, realistic deposit requirements are:

Minimum viable path: 10% deposit + LMI = $100,000-$150,000 total capital for a $600,000-$750,000 property

Standard recommendation: 20% deposit = $150,000-$250,000 total capital for a $600,000-$1,000,000 property

Equity strategy: $0 cash deposit but requires existing property with $150,000+ accessible equity

The "right" amount depends on your circumstances, but the fundamental principle remains: more deposit means better rates, lower costs, and improved financial resilience.

If you're starting from zero savings, expect 3-5 years of disciplined saving to accumulate a 20% deposit for entry-level investment property. This timeline can be shortened by:

• Buying your home first, then leveraging equity
• Two-income households combining savings
• Using guarantors to reduce deposit requirements
• Accepting LMI to enter sooner (in strong growth markets)
• Targeting lower-priced markets
• Implementing a rentvesting strategy

Property investment isn't a race. Building sustainable wealth requires patience, discipline, and proper financial preparation. Ensure you have adequate deposit, reserves, and income to comfortably hold your investment through market cycles.

The deposit is just the entry ticket. Long-term success comes from selecting quality locations, maintaining properties well, managing tenants effectively, and holding through market fluctuations. Start with sound financial foundations, and your investment journey will be more secure and successful.

Disclaimer: This article is for educational purposes only and should not be considered financial advice. Always consult with licensed professionals before making investment decisions.

Sources

• Money.com.au: Lenders Mortgage Insurance Guide 2025
• Own Home: LMI on 5% Deposit Home Loans
• Wealthy You: How Much Deposit to Avoid LMI
• Commonwealth Bank: Australian Government 5% Deposit Scheme
• Odin Mortgage: How Much Deposit in Australia
• NAB: Understanding LMI for Home Loans
• Capitol Home Loans: How Much Deposit 2025