How to Structure Your Investment Property Deposit

Most lenders require a 20% deposit for an investment property to avoid Lenders Mortgage Insurance, though endodontists can often access loan to value ratios up to 90% or even 95% depending on lender policy and your overall borrowing profile.

The deposit you'll need depends less on the property itself and more on how you're funding it. If you're using equity from your principal residence, the calculation works differently than if you're saving cash. If you own your practice premises or have recently refinanced, you might already have enough accessible equity to cover the full deposit without touching your cash reserves.

Why the 20% Deposit Threshold Matters for Investors

Reaching a 20% deposit means you borrow at an 80% loan to value ratio, which avoids LMI and typically gives you access to better investor interest rates. Consider an endodontist purchasing a unit near a teaching hospital as a longer-term hold. With a 20% deposit, they avoid the upfront LMI cost that might add $15,000 to $25,000 to the loan amount, and they're more likely to negotiate a rate discount given the lower risk profile.

Some lenders offer LMI waivers for dentists on investment lending at loan to value ratios up to 90%, though policies vary and often depend on your overall financial position, existing debt, and the lender's appetite for professional lending. That waiver can make a material difference if you're deploying capital across multiple purposes, such as expanding your practice and acquiring property in the same financial year.

Using Equity Instead of Cash Savings

If you own your home or practice premises outright or with a mortgage well below 80% of the property's value, you can often release equity to fund your investment deposit without needing cash savings. The lender assesses your total borrowing across both properties and calculates serviceability on the combined debt, but the deposit itself is effectively sourced from the existing asset.

In our experience, endodontists who've owned their principal residence for several years and benefited from property appreciation often have $150,000 to $300,000 in accessible equity. Releasing enough to cover a 20% deposit plus stamp duty and other costs means the investment purchase can proceed without disrupting working capital or liquidity needed for the practice. The refinance on the principal residence becomes the funding source, and the investment loan itself might only need to cover 80% of the purchase price.

Deposit Requirements When Buying Your Second or Third Property

Once you own one investment property, lenders assess subsequent purchases more conservatively. Your deposit requirement doesn't change in percentage terms, but serviceability becomes tighter because rental income is typically shaded by 20% to 30% to account for vacancy and maintenance costs. That shading affects how much you can borrow, not the deposit itself, but it often means you need a slightly larger deposit or lower purchase price to keep the loan amount within serviceability limits.

As an example, an endodontist with one established investment property generating $650 per week in rent might find the lender only credits $455 to $520 of that income when assessing borrowing capacity for a second purchase. If your goal is expanding your property portfolio, structuring each loan with sufficient equity buffer and ensuring rental income is close to covering holding costs helps preserve borrowing capacity for the next acquisition.

How Recent Budget Changes Affect Deposit Strategy

If you're buying an established residential investment property from 13 May 2026 onwards, the 50% capital gains tax discount and full negative gearing deductions will no longer apply from 1 July 2027. New builds remain incentivised under both measures, which shifts the relative appeal of different property types.

For endodontists considering whether to direct a larger deposit toward an established property or a new build, the tax treatment now favours new construction. A new build allows you to choose between the 50% CGT discount or cost base indexation when you eventually sell, and negative gearing deductions remain fully claimable against all income. That doesn't necessarily mean a new build suits your investment strategy, but it does mean the deposit decision should account for the after-tax return over the hold period, not just the upfront loan to value ratio.

Interest Only Loans and Deposit Structuring

Most investors structure their investment loans for dentists on an interest only basis for the first five to ten years, which reduces the monthly repayment and improves cash flow. The deposit requirement doesn't change, but the repayment structure affects how much rental income you need to cover holding costs and whether the property generates a net loss that can be offset against other income.

If you're buying an established property acquired after Budget night, that net loss can only be claimed against other residential property income or capital gains from 1 July 2027, not against your specialist income. That makes the cash flow position more important because you can't rely on the tax refund to subsidise the holding cost as generously as before. A larger deposit reduces the loan amount and the interest cost, which narrows the gap between rental income and expenses.

Structuring Across SMSF and Personal Name

Some endodontists acquire investment property through their self-managed super fund rather than in personal name, particularly if they're in the later stages of their career and focused on building retirement assets. SMSF loans for dentists are structured differently, with a maximum loan to value ratio typically around 80% and no option for LMI. That means a 20% deposit is usually the minimum, and the deposit must come from existing super balances or contributions within the annual caps.

Rental income inside the fund is taxed at 15% during accumulation phase, and capital gains receive a one-third discount if the asset is held for more than 12 months, which compares favourably to the revised personal tax treatment for established properties acquired after Budget night. The trade-off is liquidity: once the property is owned by the fund, you can't access the equity or income until you meet a condition of release.

Call one of our team or book an appointment at a time that works for you. We'll review your equity position, borrowing capacity, and structuring options to work out the most effective way to fund your deposit and set up the investment loan to suit your longer-term goals.

Frequently Asked Questions