How to Calculate Your Investment Property Deposit

How Much Deposit Do You Need for an Investment Property?

Most lenders require a minimum 10 per cent deposit for an investment property, plus stamp duty and other upfront costs paid from genuine savings or equity. Borrowing above 80 per cent loan to value ratio triggers Lenders Mortgage Insurance, which can add several thousand dollars to your upfront cost or be capitalised into the loan amount.

Consider an investor purchasing a unit in central Hobart. At a purchase price within the suburb's current median, a 10 per cent deposit still leaves an LVR of 90 per cent once you account for capitalised LMI. That pushes the total amount borrowed close to $50,000 higher than the purchase price alone. The difference between an 80 per cent LVR and a 90 per cent LVR in this scenario is around $12,000 to $18,000 in LMI, depending on the lender and your employment type.

If you already own property, you may be able to access equity release rather than saving cash. A valuation on your existing home establishes how much usable equity sits above the 80 per cent threshold, and that equity can fund the deposit and costs on the investment purchase without triggering LMI on either loan.

What Counts as Genuine Savings for an Investor Deposit?

Genuine savings are funds held in your own name for at least three months in a standard savings account, term deposit, or offset account. Lenders treat this requirement differently depending on your LVR and deposit source.

At 90 per cent LVR, most lenders require at least 5 per cent genuine savings. The remaining 5 per cent can come from a gift, first home owner grant if applicable, or other non-savings sources. Equity from an existing property does not require a genuine savings component, because the equity itself demonstrates your ability to service debt and accumulate wealth through property.

Sale proceeds from shares, managed funds, or other investments typically qualify without a holding period, provided the lender can verify the source. Proceeds from the sale of another property are treated the same way. Borrowed funds, including personal loans or credit card advances, do not qualify as genuine savings and will be treated as existing debt in your borrowing capacity assessment.

Stamp Duty and Upfront Costs in Tasmania

Stamp duty on investment property in Tasmania is calculated on a tiered scale and must be paid within three months of settlement. For a property purchased at the current Hobart median, duty sits between $14,000 and $18,000. For regional areas such as Launceston or Devonport, duty on median-priced property ranges from $9,000 to $12,000.

Other upfront costs include building and pest inspections, conveyancing fees, loan establishment fees, and valuation costs. Budget another $3,000 to $5,000 for these items. If you are buying an apartment, also factor in a body corporate records search and first quarter strata levies, which are adjusted at settlement.

These costs cannot be added to your loan amount. Lenders assess your deposit based on the property's purchase price or valuation, whichever is lower. Any amount above that figure, including duty and legal fees, must come from your own cash or equity.

How Lenders Assess Rental Income on Investment Property Applications

Lenders do not use the full rental income when calculating your ability to service an investment loan. Most lenders apply a shading factor of 20 per cent to account for vacancy, maintenance, and property management fees. If a property generates $450 per week in rent, the lender will assess your income at $360 per week.

For properties not yet tenanted, lenders rely on a rental assessment from a licensed property manager or valuer. The assessment must be dated within 90 days of application and state the expected weekly rent based on comparable properties in the same area. In suburbs such as Kingston or Glenorchy, vacancy rates and seasonal demand affect the rental figure, and a conservative assessment protects both you and the lender from overcommitting.

If you are buying your first investment property, lenders also apply a higher interest rate buffer when testing serviceability. The buffer sits at 3 percentage points above the actual product rate, so a loan with a variable rate of 6.2 per cent is tested at 9.2 per cent. Combined with the rental shading, this makes serviceability the binding constraint for most investors, not the deposit itself.

Interest Only Loans and How They Affect Deposit Requirements

An interest only loan reduces your monthly repayment during the interest only period, typically up to five years. The loan amount does not reduce during this time, but your cash flow improves because you are not repaying principal.

Lenders assess interest only applications more conservatively. Serviceability is tested on a principal and interest basis even if you elect interest only, and some lenders cap interest only lending at 80 per cent LVR. If you are borrowing above 80 per cent, expect to be locked into principal and interest repayments, at least until you refinance or pay down the loan below that threshold.

For investors with multiple properties, interest only can be a useful tool to manage cash flow while directing surplus income toward paying down non-deductible debt such as an owner-occupied home loan. This approach, sometimes called debt recycling, accelerates wealth accumulation by keeping investment debt high and deductible while eliminating private debt as quickly as possible.

Portfolio Lending and the Impact of Existing Investment Debt

If you already own one or more investment properties, each additional purchase is assessed within the context of your full portfolio. Lenders aggregate your investment debt, apply rental shading across all properties, and calculate a net rental position. If your total rental income after shading does not cover your total investment loan repayments, the shortfall is treated as an ongoing expense and reduces your borrowing capacity for the next purchase.

Under current prudential settings, lenders are also required to limit the proportion of new investment loans made at a debt-to-income ratio of 6 times or greater. For investors expanding their property portfolio, this means your total debt across all loans, both owner-occupied and investment, is measured against your gross household income. A household earning $120,000 per year will face additional scrutiny or a declined application if total borrowings exceed $720,000, depending on the lender's portfolio mix and risk appetite at the time of application.

This does not mean you cannot borrow above that threshold, but it does mean fewer lenders will approve the loan, and those that do may price the loan higher or require a larger deposit to offset the risk.

Tax Law Changes and What They Mean for Your Deposit Strategy

From 1 July 2027, rental losses on residential investment properties purchased after 7:30pm AEST on 12 May 2026 can no longer be offset against wage income. Losses are quarantined and can only be used against future rental income or capital gains on residential property.

This does not change your deposit requirement, but it changes the cash flow equation. If you were relying on a tax refund to cover the gap between rent and repayments, that refund will no longer arrive. You will need to fund the shortfall from your own after-tax income, which makes serviceability tighter and increases the importance of holding a buffer in your offset account.

Properties classified as eligible new builds retain access to negative gearing under the old rules. For Tasmanian investors, this means new apartments in Hobart or Launceston, or newly constructed homes on subdivided land in growth areas such as Sorell or Blackmans Bay. The definition is strict and a knock-down rebuild that does not increase the number of dwellings on the site does not qualify.

Call one of our team or book an appointment at a time that works for you to discuss how the updated tax rules interact with your deposit, loan structure, and long-term property strategy.

Frequently Asked Questions