How Much Deposit for an Investment Property

Twenty percent is the number that avoids lenders mortgage insurance. Below that, most lenders will still lend, and the insurance is what you pay for the privilege.

On a property at the price our calculator uses as its default, $801,058, twenty percent is $160,212.

That is the answer people come for, and it is the wrong number to plan against on its own, because the deposit is not the only cash you need at settlement.

Lenders also set their own policies on investment lending, and those are theirs rather than ours to state. What follows is arithmetic, not lending advice.

Same property, three positions. The right-hand column is the one worth reading, because it is the cash that actually has to exist.

Beyond the deposit sit transfer duty of $9,642 on the land contract, legal fees of $1,500 and borrowing costs of $4,000. That is $15,143 in every row, whatever the deposit is.

It does not include a building and pest inspection or a depreciation schedule, neither of which our calculator models, and which together add several hundred to a thousand dollars.

Lenders mortgage insurance is not in the table either. It applies below twenty percent, the amount depends on the lender and the loan size, and it is not ours to quote.

This is the detail worth pausing on, because it says something about how the properties we sell are actually funded.

The deposit field in FAA's investment property calculator ships set to zero. Not twenty percent, not ten. Zero.

That is not a claim that no deposit is needed. It reflects that a large share of investment purchases are funded from equity in a property the buyer already owns, rather than from cash saved for the purpose. Where equity does the work, there is no cash deposit in the transaction at all.

It changes the question people should be asking. Not how much cash do I have, but how much usable equity do I have, and what will a lender let me draw against it.

That is a question for a broker or a lender rather than for us. We are not a lender and we do not provide credit advice.

The deposit is not only an entry cost. It sets the loan, and the loan sets the largest recurring expense you will have.

At the engine's 6.3% default rate, interest on the full $801,058 is $50,467 in a year. On an eighty percent loan of $640,846, it is $40,373.

So the $160,212 deposit is buying about $10,000 a year of avoided interest, before tax. Whether that is a good use of $160,212 depends on what else the money could do, which is a genuine question rather than a rhetorical one.

The engine also models an interest-only period of five years by default, which lowers the early payments and does nothing to the principal. That is a structure choice with real consequences and it belongs in a conversation with a broker.

Our product is house-and-land, and it moves this arithmetic in a way established stock does not.

The duty figure in the table above is $9,642 because it is calculated on the land contract of $320,423 rather than on the full $801,058. Duty on the full price would be $29,074, which is $19,432 more cash needed at settlement.

That outcome depends on the arrangement genuinely being two contracts, and it is a question for your solicitor rather than something that follows from the label. We have set out that condition in full on our stamp duty page and it should be read before relying on the number.

There is a second timing difference. On a house-and-land purchase the land settles first and the build is progress-paid, so the cash requirement is spread rather than landing in one day.

We can tell you what a property costs to buy and hold, and show the arithmetic rather than asserting a conclusion. That is what the calculator is for.

We cannot tell you what a lender will approve, what your borrowing capacity is, or what lenders mortgage insurance will cost you. FAA is not a lender and holds no credit licence of its own. Credit assistance is provided under Australian Credit Licence 388789, which authorises credit services only.

We also cannot advise on whether releasing equity from your home is a sensible thing to do in your circumstances. That is financial advice and it needs a licensed adviser.

The order that usually works is: find out what you can borrow, then work out what a property costs to hold, then decide. Doing it the other way around produces a lot of disappointment.