Investment Property Deposits: Everything You Need to Know

Most lenders require a minimum 10 per cent deposit for investment property loans, though a 20 per cent deposit typically unlocks lower rates and avoids Lenders Mortgage Insurance.

The deposit requirement for investment property finance is rarely the only hurdle. Lenders also assess where that deposit came from, how long you have held it, and whether it meets genuine savings criteria. For public health dentists with stable salaries but limited time to build large cash reserves, understanding these requirements early shapes whether you can proceed with confidence or need to adjust your timeline.

Why Investment Deposits Are Higher Than Owner-Occupied

Lenders treat investment loans as higher risk than owner-occupied borrowing. A 10 per cent deposit is the absolute floor for most investment loan products, and many lenders apply stricter serviceability tests even at that level. Above 80 per cent loan to value ratio, you pay LMI. Below 80 per cent, you typically access better investor interest rates and can negotiate rate discounts more effectively.

Consider a dentist working in a regional public health role who wants to purchase a unit close to a capital city. If the property is worth $500,000, a 10 per cent deposit of $50,000 plus stamp duty and other costs means coming to settlement with around $75,000 in total. At that LVR, the lender charges LMI and applies a loading to the variable interest rate. A 20 per cent deposit of $100,000 removes the LMI cost entirely and unlocks access to discounted rates, which over a 30-year loan term can shift the total interest bill by tens of thousands of dollars.

What Counts as Genuine Savings for Investment Loans

Genuine savings are funds you have accumulated over at least three months and held in your own name. Lenders want to see regular deposits into a savings account, term deposit, or offset account. Funds received as a gift, bonus, or inheritance less than 90 days before application do not usually count, though some lenders will accept them as part of your total deposit if you can also demonstrate genuine savings elsewhere.

For public health dentists, salary sacrifice into superannuation does not help with deposit assessment, but consistent contributions to an offset account or high-interest savings account do. If you receive annual leave loading or shift penalties, those amounts count as genuine savings once banked for three months. Equity in an existing property can also be used as a deposit through equity release, bypassing the genuine savings test entirely in many cases.

Using Equity Instead of Cash

If you already own a home, you can use the equity in that property as your deposit for an investment purchase. Lenders will allow you to borrow up to 80 per cent of the value of your existing property without paying LMI on the top-up, provided your total borrowing does not push your combined loan to value ratio above 80 per cent across both properties.

In a scenario where a public health dentist owns a home worth $700,000 with a remaining loan of $400,000, they hold $300,000 in equity. The lender will allow borrowing up to $560,000 in total, which is 80 per cent of $700,000. Subtracting the existing $400,000 loan leaves $160,000 available for equity release. That $160,000 can cover the deposit, stamp duty, and settlement costs on an investment property without needing to save additional cash. The dentist refinances the home loan to $560,000, then applies for a separate investment loan to fund the remainder of the purchase price.

How the New Negative Gearing Rules Affect Deposit Strategy

From 1 July 2027, rental losses on residential investment properties purchased after 12 May 2026 can only be offset against other rental income or carried forward, unless the property is an eligible new build. This quarantining of losses does not change deposit requirements, but it does change the cash flow profile of holding an investment property on a modest public health salary.

A dentist purchasing an established unit in late 2026 will not be able to claim rental losses against their salary from mid-2027 onward. If the property costs $3,000 per month in loan repayments and body corporate fees but generates $2,400 in rent, the $600 monthly shortfall must be funded from after-tax income without any offset. Over a year, that is $7,200 in cash flow that cannot be recovered through a tax refund. A larger deposit reduces the loan amount, which in turn reduces the monthly repayment and narrows that cash flow gap. Alternatively, purchasing a new build allows continued negative gearing under the old rules, which may justify stretching the deposit to secure that type of property.

Fixed Rate Versus Variable Rate and Deposit Size

Some lenders offer slightly lower rates on investment loans when you fix for two or three years, though the discount has narrowed compared to previous cycles. More relevant to deposit planning is that fixed rate investment loan products often have stricter LVR caps. A lender may offer a variable rate investment loan at 90 per cent LVR but cap fixed rate lending at 80 per cent LVR for investment purposes.

If you want rate certainty and are weighing investment loan options across lenders, confirm the maximum LVR for each product type before finalising your deposit target. A 15 per cent deposit may be sufficient for a variable rate loan but inadequate for the fixed rate product you prefer, forcing you to either increase the deposit or accept a variable rate.

Interest Only Loans and Deposit Requirements

Interest only investment loans require the same minimum deposit as principal and interest loans, but serviceability is often tighter because lenders assess your ability to service the loan on a principal and interest basis even if you elect interest only repayments. That assessment can reduce your maximum borrowing capacity, which in turn may require a larger deposit to afford the same property.

A public health dentist earning $140,000 per year with no other debts might be approved to borrow $650,000 on a principal and interest investment loan but only $600,000 if they request interest only. If the target property costs $650,000, the shortfall must come from a larger deposit. The benefit of interest only is lower monthly repayments during the interest only period, which improves cash flow if you are building a portfolio or managing other commitments. Whether that trade-off justifies the higher deposit depends on your broader property investment strategy and how much liquidity you want to preserve.

Stamp Duty and Other Upfront Costs

Stamp duty on investment properties in most states is calculated at the standard transfer duty rate without any concessions. In Victoria, for instance, a $500,000 investment property incurs approximately $25,000 in stamp duty. In New South Wales, the same property attracts around $17,000. Queensland, South Australia, and Western Australia each have their own scales. These figures are separate from your deposit and must be funded at settlement.

Other upfront costs include conveyancing fees, building and pest inspections, lender application fees, and valuation fees. Together, these typically add $3,000 to $5,000 to the amount you need at settlement. When planning your deposit, calculate the total cash required as deposit plus stamp duty plus settlement costs, then confirm that figure fits within your savings and borrowing capacity. Underestimating these costs by even $10,000 can delay settlement or force you to seek a higher LVR loan, triggering LMI.

How DTI Caps Interact With Deposit Size

From February 2026, lenders are restricted in how many investment loans they can write above six times your gross income. If you earn $140,000 as a public health dentist, a debt-to-income ratio of six times means total borrowing of $840,000. If you already have a $500,000 home loan, your investment loan is capped at $340,000 under the DTI restriction unless the lender has capacity within their 20 per cent allowance.

A larger deposit reduces the loan amount, which can bring you under the DTI cap or make your application more attractive to the lender. If the target property is worth $450,000 and you can contribute a $110,000 deposit instead of $90,000, the loan amount drops from $360,000 to $340,000, clearing the cap entirely. This is one reason low deposit loans for dentists have become harder to arrange for investment purposes in the current environment.

Call one of our team or book an appointment at a time that works for you. We work with lenders who understand public health employment structures and can structure your deposit and borrowing to fit your income, your timeline, and the investment you want to make.

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