How to Save Your Investment Property Deposit Faster

Most lenders want a 20 per cent deposit before they'll approve an investment property loan, though some will go lower if you're prepared to pay Lenders Mortgage Insurance.

That deposit requirement shapes everything else about your purchase timeline, your borrowing capacity, and which loan products become available to you. The difference between a 10 per cent and 20 per cent deposit can mean paying an extra $15,000 to $30,000 in LMI on a typical Molendinar unit or townhouse, but it can also get you into the market two years earlier. For investors targeting properties near the Molendinar town centre or along Cheltenham Drive, that timing can matter more than the upfront cost.

Why 20 Per Cent Matters More for Investors

A 20 per cent deposit keeps you below an 80 per cent loan to value ratio, which is the threshold where lenders start adding LMI and tightening their serviceability requirements. Investor loans already carry higher interest rates than owner-occupier loans, typically around 0.20 to 0.40 percentage points higher depending on the lender. Once you cross 80 per cent LVR, those rate premiums increase further, and some lenders will reduce the amount they're willing to lend based on rental income.

Consider a buyer looking at a two-bedroom unit near Molendinar State School. If they're putting down 20 per cent, they'll access standard investor rates and the rental income will be assessed at around 80 per cent of market rent. If they're only putting down 10 per cent, the lender may reduce that rental income assessment to 70 per cent and apply a higher rate, which shrinks the borrowing capacity by $30,000 to $50,000 depending on other income sources.

Can You Use Equity Instead of Cash?

You can, and it's one of the most common ways experienced investors fund their next purchase without saving for years. If you own a home in Molendinar or elsewhere on the Gold Coast and it's increased in value, you may be able to refinance and access that equity as your deposit. Lenders typically let you borrow up to 80 per cent of your property's current value without paying LMI, so if your home is worth $600,000 and you owe $400,000, you've got around $80,000 in usable equity.

That equity can cover your deposit and even your stamp duty and other settlement costs, which means you're not pulling cash from your savings account. The downside is that you're increasing the debt on your home, which lifts your monthly repayments and reduces the amount you can borrow for the investment property loan itself. You'll need enough income to service both loans comfortably, and lenders will assess you at a rate at least 3.0 percentage points above the actual loan rate under APRA's serviceability buffer.

What About Smaller Deposits and LMI?

Some lenders will approve investor loans with a 10 per cent deposit, though the list is shorter than it used to be and the criteria are tighter. You'll pay LMI, which is a one-off premium that protects the lender if you default. The cost depends on your LVR and loan amount, but for a $400,000 loan at 90 per cent LVR, expect to pay somewhere between $12,000 and $18,000. That premium gets added to your loan, so you're also paying interest on it over the life of the loan.

In our experience, investors who go this route are usually trying to get into the market before prices move further or before proposed tax changes take effect. If you're buying an established property and the negative gearing changes become law in mid-2027, you'd lose the ability to offset rental losses against your other income. That can shift the affordability calculation enough that waiting another year to save a bigger deposit might actually cost more than paying LMI now.

Using a Guarantor to Skip LMI

If a parent or family member is willing to use their property as security, you can sometimes borrow up to 100 per cent of the purchase price without paying LMI. The guarantor isn't handing over cash, they're just letting the lender use a portion of their property's equity as additional security until you've paid down enough of the loan to stand on your own.

This works well for younger investors who have solid income but haven't had time to build up savings, or for buyers who want to keep their cash reserves intact for renovations or other investments. The guarantor is only liable for the portion of the loan that exceeds 80 per cent LVR, not the full amount, and they can usually be removed from the loan once you've paid it down or the property has increased in value enough to bring your LVR below 80 per cent.

How Molendinar's Rental Market Affects Your Borrowing

Lenders don't just look at your deposit, they also assess whether the rental income will cover enough of the loan repayment to make the investment serviceable. Molendinar has a mix of older units, townhouses, and newer developments, and the rental yield varies depending on which part of the suburb you're buying in. Properties closer to the M1 and within walking distance of local schools tend to hold tenants more consistently, which keeps vacancy periods short.

When you apply for a loan, the lender will either use a rental assessment from a licensed property manager or their own internal valuation. They'll then apply a shading factor, usually 20 to 30 per cent, to account for vacancies and management costs. If the expected rent is $450 per week, they'll assess it at $315 to $360 per week for serviceability purposes. If you're borrowing at 90 per cent LVR, that shading factor increases, which is another reason why a larger deposit makes the loan application smoother.

Should You Split Your Deposit Across Variable and Fixed?

Once you've sorted out your deposit size, you'll need to decide whether to fix part of the loan, keep it all variable, or split it. A split loan lets you lock in part of your rate while keeping the rest flexible, which is useful if you think rates might rise but you also want the option to make extra repayments or access an offset account. Most lenders let you split in any proportion, so you could fix 50 per cent and leave 50 per cent variable, or go 70/30 depending on your appetite for certainty versus flexibility.

Fixed rates don't come with offset accounts in most cases, so if you're planning to park rental income or other savings to reduce interest, you'll want to keep at least part of the loan variable. If you're more focused on capping your repayment amount and you're not planning to pay extra, fixing a larger portion might suit you.

Interest Only Repayments and How They Affect Your Deposit Strategy

Most property investors choose interest-only repayments for the first few years because it keeps the monthly cost lower and maximises the tax deduction. You're not paying down the principal, which means your loan balance stays the same, but you're also not tying up cash in equity that you could use elsewhere. After the interest-only period ends, usually five years, the loan reverts to principal and interest and the repayment jumps up.

Lenders assess interest-only loans more conservatively than principal and interest loans, so your borrowing capacity will be lower. If you're trying to stretch your deposit as far as possible, that reduced capacity can bring you back to needing a bigger deposit to afford the property you're targeting. It's a trade-off between lower repayments now and higher repayments later, and it only makes sense if you've got a clear plan for what you'll do when the interest-only period ends.

Getting your deposit together is the first real test of whether an investment property fits your financial situation. If you've got equity to pull from your home, or you're happy to pay LMI to get in sooner, the path is shorter than most people think. If you're starting from scratch and saving cash, focusing on a 20 per cent deposit will give you more investment loan options and lower ongoing costs. Either way, the numbers need to work before you start looking at properties, not after you've found one you like.

Call one of our team or book an appointment at a time that works for you.

Frequently Asked Questions