The deposit is the first hurdle to an investment property, and the real cash you need is more than the headline 20 per cent once buying costs are added. This guide covers why 20 per cent is the benchmark, buying with less by paying LMI, using equity instead of cash, and the trade-offs of each.
The headline answer for an investment property is usually 20% of the purchase price, but the real cash you need is more than that once buying costs are added. On a $600,000 investment property, a 20% deposit is $120,000 — and stamp duty plus legal and loan costs can add roughly $30,000 to $40,000 on top, so the true cash required is closer to $155,000.
Work through your own figures with our deposit calculator and stamp duty calculator.
Twenty percent is the level at which lenders generally waive lenders mortgage insurance. Below it, the loan is considered higher risk and the lender charges LMI to protect itself — a cost that can run into the thousands and is added to your loan. Reaching 20% avoids that premium and usually unlocks better interest rates, which is why it is the target most investors aim for.
You can often buy an investment property with as little as 10%, sometimes less, by paying LMI. On a $600,000 property, a 10% deposit is $60,000 rather than $120,000 — a much lower barrier to entry — but you pay the insurance premium and borrow more, so your repayments and interest are higher.
A bigger deposit means a smaller loan, less interest, better cash flow and no LMI — but it takes longer to save and ties up more of your capital in one property. A smaller deposit gets you into the market sooner and preserves cash, but costs more to service. There is no universally right answer; it depends on how quickly prices are moving, how comfortably you can service the larger loan, and whether you would rather buy now or wait.
Many investors fund the deposit on a second property not with fresh savings but with the equity in a property they already own. If your home has risen in value and the loan has shrunk, you may be able to borrow against that equity to form the deposit — effectively using one property to help buy the next. This is powerful but increases your total borrowing and ties the properties together, so it magnifies both gains and risks. Our home equity calculator illustrates how much may be available.
If you are building a deposit from scratch, the fundamentals are the same as any large savings goal: a clear target, a realistic timeline, and consistent contributions to a dedicated account earning interest. Our savings calculator and compound interest calculator show how regular deposits and compounding shorten the journey. A written plan, revisited each month, beats hoping the money adds up on its own.
Having the deposit is necessary but not sufficient. You also need the borrowing capacity to service the loan, a buffer for vacancy and repairs, and comfort with the weekly cash flow the property will demand. A deposit gets you to the starting line; the ongoing numbers decide whether you should run the race. Check the full picture with our affordability calculator before committing.
How much deposit do I need for an investment property?
Usually around 20 per cent of the price to avoid lenders mortgage insurance, plus buying costs. On a $600,000 property that is $120,000 deposit plus roughly $30,000 to $40,000 of stamp duty and fees — so about $155,000 in cash.
Can I buy an investment property with a 10% deposit?
Often yes, by paying lenders mortgage insurance. A 10 per cent deposit on a $600,000 property is $60,000 rather than $120,000, letting you enter sooner — but you pay the LMI premium and borrow more, so repayments and interest are higher.
What is LMI and who does it protect?
Lenders mortgage insurance is a premium charged when you borrow with less than a 20 per cent deposit. Despite the name, it protects the lender if you default — it gives you no protection. It is simply the price of buying with a smaller deposit.
Can I use equity instead of a cash deposit?
Yes. Many investors fund a deposit by borrowing against the equity in a property they already own, rather than saving fresh cash. This is powerful but increases total borrowing and ties the properties together, magnifying both gains and risks.
Does having the deposit mean I can buy?
Not on its own. You also need the borrowing capacity to service the loan, a buffer for vacancy and repairs, and comfort with the weekly cash flow. A deposit gets you to the starting line; the ongoing numbers decide whether you should proceed.