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.4
- Applying online can save you hundreds of dollars in establishment fees.#
- Pay down your loan quicker with The Boost for Home Loans9.
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.
- 100 per cent Offset. You can save thousands of dollars in interest payments with multi-account offset.6
- 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.4
- Save $600 in establishment fees by applying online.#
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 won’t jump around before you buy your investment property.7
- Fee-free extra repayments of up to $30,000 for the entire fixed rate period.8 If your budget allows it, make extra repayments and bring your loan down faster.8
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?