Top 10 Ways to Fund Your Investment Property Deposit

The deposit is the first real test of whether your investment strategy will launch or stall.

Between regulatory changes, lender appetite shifting constantly, and tax reform landing in July 2027, how you fund your deposit now shapes both what you can borrow and how much of your portfolio remains flexible down the track. Most lenders want to see at least 10 per cent genuine savings or equity for an investment purchase, though some will consider 5 per cent if the rest of your position is strong. The difference between those two numbers can mean paying Lenders Mortgage Insurance or avoiding it entirely, and that cost alone can run to $15,000 or more depending on the property value and loan size.

Using Equity from Your Marmion Home

If you own property already, the equity in that asset is usually the fastest and most flexible deposit source.

Lenders will generally allow you to borrow up to 80 per cent of your home's value without needing mortgage insurance, which means if your property is worth $900,000 and you owe $400,000, you have access to around $320,000 in usable equity before LMI applies. In Marmion, where median values have held firm thanks to the coastal location and proximity to the Marmion Marine Park, many owners find they have built substantial equity without realising it. That equity can be released through refinancing or by adding a separate loan split, and it counts as genuine funds because it is not a gift or unsecured borrowing.

Consider an investor who owns a home in Marmion valued at $850,000 with a $350,000 mortgage. At 80 per cent LVR, the maximum borrowing against that property is $680,000, leaving $330,000 in accessible equity. After setting aside funds for purchase costs such as stamp duty and legals, that investor has enough to fund a 20 per cent deposit on a $300,000 unit without touching savings. The original home loan is refinanced to pull the equity out, and a separate investment loan is taken for the remaining 80 per cent of the purchase price. This structure keeps the investment debt separate and preserves flexibility if rates or circumstances change.

Genuine Savings and the 90-Day Rule

Savings still matter, especially if you are buying your first investment property or do not have existing equity to draw on.

Lenders define genuine savings as funds that have been held in your account for at least three months and were not borrowed or gifted. That means a bonus payment, tax refund, or inheritance needs to sit in your savings account for 90 days before it counts. Some lenders will accept a shorter history if the deposit comes from the sale of an asset like shares, but most want to see consistent saving behaviour rather than a sudden lump sum that appeared last week. The 90-day rule applies even if the money is sitting in an offset account or term deposit.

If you are relying on savings rather than equity, plan your timeline early. Waiting three months can feel like a delay, but it opens access to lenders who would otherwise decline the application or price it higher due to perceived risk.

Deposit Requirements Across Different LVR Bands

The loan-to-value ratio determines more than just whether you pay LMI.

At 80 per cent LVR, most investors avoid mortgage insurance entirely and access the widest range of lender options and rate discounts. At 85 or 90 per cent, LMI becomes a cost, and some lenders restrict investment loan options or apply interest rate loadings. A small number of lenders will go to 95 per cent LVR for investors, but those products usually require a guarantor, come with higher rates, and limit the loan features available. The deposit you bring shapes the interest rate you pay, the lenders who will compete for your business, and the loan features you can access such as offset accounts or the ability to capitalise LMI into the loan.

Debt-to-income caps introduced in February this year also mean lenders are more sensitive to the total borrowing relative to your income, so a larger deposit can improve your chances of approval even if serviceability looks tight on paper.

First Home Buyers Transitioning to Investment

If you purchased your home under a first home buyer scheme and have since moved or plan to rent it out, the transition to investment can unlock equity while creating a new income stream.

Once your property is reclassified as an investment, you can claim interest as a deduction and access investor loan products that might offer better features for your situation. The deposit for your next purchase, whether it is another investment or a new owner-occupied home, can come from the equity built in that first property. Just be aware that switching from owner-occupied to investment usually triggers a rate increase on the existing loan, and some lenders require you to refinance rather than simply change the loan purpose.

This strategy works particularly well in suburbs like Marmion where rental demand from young families and professionals looking to be near the beach keeps vacancy rates low. Rental income from a property in a tightly held coastal pocket can support serviceability for the next purchase while the equity funds the deposit.

Tax Reform and the Case for Acting Before July 2027

The Treasury Laws Amendment (Tax Reform No. 1) Act 2026 changes the investment landscape from 1 July 2027, and that timeline affects deposit decisions now.

Properties purchased before that date remain fully negatively geared under the existing rules, meaning rental losses can still be offset against your salary or other income. Properties purchased after 7:30pm on 12 May 2026 that are not eligible new builds will have rental losses quarantined from July 2027 onward, limiting their use to offsetting future rental income or capital gains only. If you are considering an established property and want access to negative gearing in the traditional sense, your deposit needs to be ready well before mid-2027 to allow time for searches, finance approval, and settlement.

New builds that increase the dwelling count retain full negative gearing access, so if your strategy includes construction or new apartments, the deposit timeline is less urgent but planning remains important.

Gifted Funds and Family Assistance

Some investors receive part of their deposit from family, and most lenders will accept gifted funds as long as a signed declaration confirms the money does not need to be repaid.

The declaration usually needs to be witnessed, and the lender will want to see the funds transferred into your account and held there for a period before settlement. Gifted deposits work particularly well when combined with a smaller amount of genuine savings, as lenders want to see you have some financial commitment of your own rather than relying entirely on someone else's contribution. If the gift is coming from overseas or from a non-family member, expect additional scrutiny and potentially stricter conditions.

Gifted funds do not count toward the 90-day genuine savings requirement, so they need to be declared separately on your application.

Offset Balances and Redraw as Deposit Sources

If you have been paying down your home loan or building up an offset account, those funds can be redirected toward an investment deposit without needing to refinance.

Most lenders treat offset balances the same as savings, provided the account is in your name and the funds have been there long enough to satisfy the genuine savings test. Redraw works similarly, though some lenders are more cautious about redraw because it suggests you have increased your home loan balance at some point, which raises questions about how you manage debt. Both options let you access capital without restructuring your entire loan, though you lose the interest-saving benefit of that offset balance once the money is withdrawn.

Be mindful of the tax treatment if you pull funds from offset or redraw to buy an investment property. The interest on any amount you redraw from your home loan and use for investment purposes may become deductible, but only if you can clearly trace the funds and their use. Mixing purposes muddies the water and can limit your deductions later.

Borrowing Capacity and Rental Income

Your deposit size affects how much you can borrow, but rental income from the new property also plays a role in the calculation.

Lenders typically shade rental income by 20 per cent to account for vacancy, maintenance, and periods without a tenant, so a property generating $600 per week is assessed at around $480 per week for serviceability purposes. If you are borrowing at a higher LVR and paying LMI, the rental income can help offset the additional cost by improving your debt serviceability position. However, lenders apply the 3 percentage point buffer when assessing whether you can service the loan, meaning your repayments are tested at a rate well above what you will actually pay.

In areas like Marmion, where rental yields tend to sit lower due to stronger capital growth and higher purchase prices, the deposit becomes even more important because the income alone is unlikely to cover the full loan repayment.

Portfolio Growth and Deposit Recycling

Once your first investment property starts building equity, that equity can fund the deposit for the next purchase, creating a repeating cycle that accelerates portfolio growth.

This approach relies on capital growth and consistent loan repayments to increase the usable equity in each property over time. If property values rise and your loan balance falls, the gap widens and you can borrow against that gap without selling. The deposit for property two comes from property one, the deposit for property three comes from properties one and two, and so on. The limitation is always serviceability, not equity, which is why rental income and borrowing capacity need to be managed carefully as the portfolio expands.

Debt-to-income caps now limit how far you can stretch this strategy, so professional advice on structuring loans and timing purchases makes a material difference to how many properties you can hold before hitting a ceiling.

Lenders Mortgage Insurance: Cost vs. Opportunity

Paying LMI to access a property sooner can sometimes make more financial sense than waiting another two years to save a larger deposit, particularly in a rising market.

LMI is a one-off cost that protects the lender if you default, and it is calculated based on your loan size and LVR. For an investment loan at 90 per cent LVR, LMI might cost $20,000 or more depending on the purchase price, but if property values are rising by 5 to 8 per cent per year, delaying the purchase to avoid that cost can mean paying an extra $30,000 to $50,000 in purchase price by the time you are ready. The decision depends on your view of the market, your income stability, and whether you can service the larger loan that includes capitalised LMI.

Some lenders allow you to add LMI to the loan rather than paying it upfront, which preserves your cash for other costs such as stamp duty, legals, and building inspections. That capitalisation increases your loan balance and your ongoing repayments, but it removes the need to find another $20,000 in savings before settlement.

Call one of our team or book an appointment at a time that works for you to discuss which deposit strategy fits your investment goals and timeline. We work with lenders across Australia and can structure your finance to keep your options open as the tax landscape shifts.

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