The deposit you need for an investment property depends on whether you're buying new or established, and recent federal budget changes have made that distinction more important than ever.
The Minimum Deposit: What Lenders Require
Most lenders require a 20% deposit for an investment property to avoid Lenders Mortgage Insurance, though some will lend with as little as 10% if you're prepared to pay LMI. With a 20% deposit, your loan to value ratio sits at 80%, which gives you access to better investor interest rates and avoids the added cost of insurance. If you're looking at an established property in Rosebud purchased after May 2026, that 20% deposit becomes even more important because the tax treatment of losses and capital gains has changed, making it harder to justify stretching your borrowing with a smaller deposit.
Consider a buyer purchasing an established unit near the Rosebud foreshore. At a 20% deposit, they borrow $400,000 and keep their loan amount manageable. Drop that to 10%, and they're borrowing $450,000, paying LMI, and carrying higher repayments on a property that can no longer offset rental losses against their salary from 1 July 2027. The numbers stop working when the tax benefits disappear.
New Builds vs Established Properties: Why the Deposit Calculation Differs
If you're buying a new build, you can still choose between the old 50% capital gains tax discount or the new inflation-indexed model when you eventually sell, and you retain full negative gearing deductions. That flexibility means a 10% deposit with LMI might still make sense for the right property, especially if you're focused on long-term portfolio growth and can manage the higher repayments. For established properties bought after Budget night in May 2026, you lose both the 50% CGT discount and the ability to claim rental losses against other income from mid-2027 onwards, so a smaller deposit and higher loan amount leaves you more exposed.
In our experience, buyers chasing off-the-plan apartments or new townhouses in the broader Mornington Peninsula area often lean on a 10% deposit because they're banking on future tax treatment staying favourable. For established homes or units, the 20% deposit is now the safer play.
Using Equity from Your Home: How It Works as a Deposit
You don't always need cash savings to reach that 20% deposit. If you own your home in Rosebud or elsewhere and have built up equity, you can use that equity as your deposit for the investment property. Lenders will typically let you borrow up to 80% of your home's value, so if your home is worth $700,000 and you owe $300,000, you have $560,000 available at 80% LVR, minus your existing debt, leaving $260,000 in usable equity.
As an example, someone with $200,000 in accessible equity could use that to cover the deposit and purchase costs on an investment property without touching their cash reserves. The lender treats the equity release as your contribution, and you avoid LMI on the investment loan as long as the combined borrowing across both properties stays within serviceability limits. This approach works well for buyers who want to keep their savings intact for other expenses or future purchases, but it does mean your home is now securing both loans, so vacancy periods or rental shortfalls need to be managed carefully.
Lenders Mortgage Insurance: When It Applies and What It Costs
Lenders Mortgage Insurance kicks in when your deposit is less than 20%, and it protects the lender if you default. The cost varies based on your loan amount and LVR, but on a $450,000 investment loan with a 10% deposit, you might pay anywhere from $10,000 to $15,000 in LMI, added to your loan or paid upfront. Some lenders will go as low as 10% for investment property, others cap it at 15%, and a handful won't lend below 20% at all, so your investment loan options narrow as your deposit shrinks.
If you're buying in an area like Rosebud where holiday rental income can fluctuate with the season, lenders may also apply a vacancy rate or discount your projected rental income, which can affect how much they're willing to lend. That makes a smaller deposit harder to justify because your borrowing capacity drops and the LMI cost rises.
Stamp Duty and Other Upfront Costs You'll Need to Cover
Your deposit isn't the only cost you need to plan for. Stamp duty in Victoria is calculated on the purchase price and isn't discounted for investors the way it is for first home buyers. On a property purchased for $500,000, stamp duty sits around $25,000, and that's due at settlement. You'll also need to budget for conveyancing, building and pest inspections, and any body corporate or council adjustments if you're buying a unit or townhouse.
These costs typically add another 3% to 5% on top of your deposit, so if you're putting down 20% on a $500,000 property, you're looking at $100,000 for the deposit plus another $15,000 to $25,000 in settlement costs. Some buyers roll stamp duty into their loan if they have enough equity or borrowing capacity, but that increases your loan amount and your repayments, so it's worth running the numbers with someone who can show you how it affects your cash flow.
Interest Only vs Principal and Interest: How Repayment Type Affects Your Deposit Strategy
Most property investors choose interest only repayments for the first few years to keep their repayments lower and maximise cash flow, especially if the property is negatively geared. The repayment type doesn't change the deposit you need, but it does change how much income you need to service the loan. On a $400,000 investment loan at current variable rates, interest only repayments might sit around $1,800 per month, while principal and interest could be closer to $2,400. That $600 difference affects how much rental income you need and whether the property washes its face each month.
If you're stretching to a 10% deposit and paying LMI, the higher loan amount combined with principal and interest repayments can leave you short each month, even with rental income factored in. Interest only buys you breathing room, but it also means your loan balance doesn't reduce, so you're relying on capital growth to build equity over time. For Rosebud properties where holiday rental demand can be strong in summer but quiet in winter, that cash flow buffer matters.
How Recent Tax Changes Affect Your Deposit Decision
From 1 July 2027, if you bought an established residential property after mid-May 2026, rental losses can only be offset against other residential property income or capital gains, not your salary. That means if your investment property costs you $5,000 more per year than it earns in rent, you can't claim that loss against your wage to reduce your tax bill. The loss gets carried forward and can offset future property income, but it doesn't give you the immediate tax refund that negative gearing used to provide.
That change makes a smaller deposit riskier. If you're borrowing 90% and paying LMI, your repayments are higher, your rental loss is larger, and you're funding that loss out of your own pocket each year without a tax offset. A 20% deposit keeps your loan amount and repayments lower, so even without negative gearing benefits, the property might still be positively geared or close to it, depending on the investment property rates you secure and the rental yield.
Building Wealth Without Overextending: Why the Deposit Matters Long-Term
A larger deposit gives you more than lower repayments. It gives you equity from day one, which means you can tap into that equity sooner for your next purchase if you're focused on portfolio growth. It also protects you if property values dip in the short term, because you're not sitting at 90% LVR where a small market correction could leave you in negative equity.
Rosebud has a mix of permanent residents and holiday properties, and values can move differently depending on which segment you're buying into. A 20% deposit gives you room to ride out those shifts without needing to sell or refinance at the wrong time. If you're serious about building wealth through property over the next decade or two, starting with a solid deposit on each purchase compounds that advantage.
If you're weighing up your options or want to understand how much you can borrow with the deposit you have, call one of our team or book an appointment at a time that works for you.
Frequently Asked Questions
What is the minimum deposit for an investment property?
Most lenders require a 20% deposit to avoid Lenders Mortgage Insurance, though some will lend with as little as 10% if you're prepared to pay LMI. A 20% deposit gives you access to better investor interest rates and keeps your loan amount manageable.
Can I use equity from my home as a deposit for an investment property?
Yes, if you own a home and have built up equity, you can use that equity as your deposit for an investment property. Lenders typically let you borrow up to 80% of your home's value, and the equity release is treated as your contribution.
How do recent tax changes affect the deposit I need for an investment property?
From 1 July 2027, rental losses on established properties bought after May 2026 can only be offset against property income, not your salary. This makes a smaller deposit riskier because higher borrowings mean larger rental losses you'll fund out of pocket without a tax offset.
Do I need a bigger deposit for an established property compared to a new build?
Not necessarily, but a larger deposit is now more important for established properties bought after May 2026 because you lose full negative gearing and the 50% CGT discount from mid-2027. New builds retain these tax benefits, so a smaller deposit with LMI may still make sense.
What other costs do I need to budget for besides the deposit?
You'll need to cover stamp duty, conveyancing, inspections, and any body corporate or council adjustments. These costs typically add another 3% to 5% on top of your deposit, so budget accordingly.
