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Are you looking to buy your first investment property? Or perhaps you’re ready to expand your portfolio? Either way, it’s important to know how much deposit you’re going to need.

In this article, we’ll look at how much you need for a deposit on an investment property, and some strategies you can implement to get you there.

What is the minimum deposit required for an investment property?

Whether you’re buying a property to live in or to invest, you’ll need 20 per cent of the purchase price as a deposit to avoid Lenders Mortgage Insurance (LMI).

For example, if you’re looking at buying a unit with a value of $650,000 as a first-time investment property, you’d need a deposit of at least $130,000 to avoid LMI.

Obviously enough, the more deposit you have, the less money you will need to repay on the loan. You can get a reasonable estimate of your repayment costs using our repayment calculator.

Factors which determine how much deposit you’ll need

  • Loan-to-value ratio
    The LVR is the proportion of the property’s value someone is willing to lend you. Typically, a bank will be happy with an LVR of 80 per cent, leaving you the standard 20 per cent deposit requirement. Some lenders may be happy with a 90 per cent LVR, leaving you
    with a 10 per cent deposit requirement (plus LMI).
  • Type of property
    There are different conditions for investment properties, owner-occupier or even off-the-plan investment loans. The location of the property could also have a bearing on deposit and loan requirements.
  • Your financial profile
    Factors such as your credit score, repayment history, and income and employment  can influence how much deposit is required. A lender wants as little risk as possible when lending money.  If you have a good lending history and credit score,
    they tend to view you more favourably.
  • Differences between lenders
    Deposit requirements differ between lenders. Shop around, investigate different lenders and their conditions to find one that aligns with your needs and how much you can afford.

Strategies for saving for a deposit

Saving for a deposit can seem like a big mountain to climb. Here are some tips to help you get there:

  • Budgeting and saving
    Cutting back on your outgoings is usually easier said than done. But often it’s simply a case of being honest with yourself. For example, can you find a cheaper mobile plan? Can you shop around for a better energy plan? Do you need so many streaming services?
    Is coffee from home just as good as the coffee from the café around the corner from work? Think of your long-term goals, and how happy you’ll be when you knock them over.
  • A side hustle
    A side hustle is a great way to boost your income. It’s always better, if possible, to monetise something you genuinely enjoy doing.
  • Family assistance
    Sometimes called the Bank of Mum and Dad, a ‘gift’ from the ‘rents could help you reach that 20 per cent deposit limit.
  • Equity in your home  Utilising the equity in your current home  for a deposit on your new investment property is a clever way to take advantage of an asset you already have.

Different types of investment property loans

Great Southern Bank has three different types of loan product for investment properties.

Basic Variable Home Loan

Our Basic Variable Home Loan is very competitive when compared to the Big Four banks, and still includes all the other benefits, such as:

  • No monthly or annual fees, ever. Save thousands of dollars over the life of your loan.
  • Unlimited extra repayments. Make as many extra repayments as you like, to bring your loan down quicker.
  • Free redraw. If you need cash in a hurry for something big, you can redraw, for free, without penalty.1
  • Applying online can save you hundreds of dollars in establishment fees.2
  • Pay down your loan quicker with The Boost for Home Loans.

Offset Variable Home Loan

With an Offset Variable Home Loan, you can use the power of an offset account to reduce your interest payments and pay off the principal quicker. Plus, you still have access to your money if something unexpected crops up.

  • 100per cent Offset. You can save thousands of dollars in interest payments with multi-account offset.3
  • Unlimited fee-free repayments. Make as many extra repayments as you like, across the life of your loan, with no fees or charges.
  • Free redraw. Access these extra repayments as a redraw, as you need, free of charge.1
  • Save $600 in establishment fees by applying online.2

Fixed Rate Home Loan

Our Fixed Rate Home Loan can be fixed for one, two, three or five years, It can give you certainty and security in a market where rates are still going up.

  • Repayment certainty. Easy to budget and save when the repayment amount is the same each month.
  • Peace of mind. Lock in your rates prior to settlement , so you know they wont jump around before you buy your investment property.4
  • Fee-free extra repayments of up to $30,000 for the entire fixed rate period.5 If your budget allows it, make extra repayments and bring your loan down faster.

Other considerations when buying an investment property

Beyond the financial considerations such as deposits, interest rates etc, there are a number of other factors to consider when buying an investment property.

  • Do you need to renovate? Is the property in need of some TLC before you can put it on the rental market? Will investing in renovations increase the amount of rent you can ask for?
  • Council rate or strata fees. Have you bought a unit with strata fees? Can you budget for ongoing council rates? How much of these do you pass on to the tenants in the amount of rent?
  • Ongoing maintenance. Having tenants and rent is fantastic, but if things break, you’re the one responsible for fixing them.
  • Ongoing fees. If you engage the services of a property manager, you will need to budget for these.
  • What is the projected increase? If you did your research, is there a projected value increase in the land where your investment property is located? Is the value of your investment going to go up over time?

We’re here to help

If you’re interested in taking out a loan for an investment property, feel free to call one of our Home Loan Specialists on 133 282. Alternatively, you can either enquire online or pop into your local branch for a chat.

Important Information

Great Southern Bank, a business name of Credit Union Australia Ltd ABN 44 087 650 959, AFSL and Australian Credit Licence Number 238317. Conditions, fees and charges apply. This is general information and does not take into account your objectives, financial situation or needs.  Consider the appropriateness of the information, including the Terms and Conditions (T&Cs) booklet, before acting on it. The Financial Claims Scheme may apply to this product; refer to the T&Cs for more information.

1 A $200 minimum withdrawal amount applies for redraws conducted in-branch.

2 Offer includes $0 Establishment Fee and is open to new or existing customers applying for a minimum application amount of $100,000 or more. Excludes applications for Internal Refinance of existing facilities. Applications must be received between 31/08/2022 and 29/02/2024 and settled by 31/05/2024. To be eligible to apply online you must be at least 18 years of age, a permanent resident of Australia, applying for yourself or as a married/defacto couple and buying an existing property or refinancing. Great Southern Bank may withdraw or amend this offer at any time without notice.

3 You must maintain a minimum balance of $500 in each offset account to obtain an offset benefit. You will also not receive any interest on the funds in your offset accounts.

4 Fixed Rate Lock is available to new applications from 27 April 2022. Great Southern Bank will apply the fixed interest rate applicable on the day of settlement unless a completed Fixed Rate Lock request form is received by us before the unconditional approval of your loan application. Fixed Rate Lock is a feature that allows customers to lock in the applicable fixed interest rate from the date we process your request, which will be once your application is submitted with all supporting documents, and you will be protected against interest rate rises for 90 days from such date.  A non-refundable Fixed Rate Lock Fee applies to each fixed rate loan that is locked, refer to our Lending Schedule of Fees for the fee amount. On expiry of the fixed rate period, the loan reverts to the Basic Variable Reference Rate relevant to your loan purpose and repayment type which applies at the time of expiry. Full terms and conditions apply and are available here.

5 A daily transfer will refund any amounts paid in advance in excess of the total advance repayments allowed during the fixed rate period ($30,000) unless sufficient to pay out the loan in full (in which case an Early Payout Cost may apply). Excess funds will be transferred to the nominated deposit account, which must remain open for the fixed rate period.

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Applying for pre-approval allows you to know the maximum amount you can borrow while you look for a property.

Pre-approval means that a lender has agreed to lend you an amount of money in-principle, but the loan hasn't been proceeded to full or final approval.

While pre-approval is not a fully approved loan it can help you narrow your search, negotiate, and make an offer with certainty and confidence.

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First Home Guarantee
Family Home Guarantee
Regional First Home Buyer Guarantee

The Australian Government has introduced initiatives to support eligible Australians to build or purchase a new home sooner: the First Home Guarantee, Family Home Guarantee and Regional First Home Buyer Guarantee.

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