Most people finance their first investment property the same way they financed — or would finance — a home: a deposit plus a loan, assessed under the same responsible-lending rules that apply to any residential loan in Australia. What’s different for an investment purchase is the detail sitting underneath that: how large a deposit keeps you under the lenders mortgage insurance (LMI) trigger, how a bank tests whether you can actually service the loan, which loan structure you pick, and how the loan interacts with tax through negative gearing and the way you hold the property. There’s also a second path worth knowing about before you commit to a mortgage at all — buying a fractional interest in a property rather than the whole thing, which needs a much smaller amount of money up front. This guide works through each piece as a set of factors and trade-offs, not a single right answer — the structure that suits you depends on your own finances and goals, and several of the questions below are genuinely a “speak to a professional” decision rather than a “read this and know” one.

How much deposit do I need for an investment property?

There’s no legal minimum deposit for an investment property — how much you need depends on the lender, the property and your own financial position. But one number shapes most first-time investors’ planning: loan-to-value ratio, or LVR, which is simply your loan amount divided by the property’s value. Moneysmart, the government’s consumer finance site, states that once your LVR passes 80% you may need to pay lenders mortgage insurance (LMI) — a policy that protects the lender if you default, not you. In practice, that means a deposit under roughly 20% of the purchase price commonly brings LMI into the picture.

That 80% trigger isn’t written as an owner-occupier-only rule. Moneysmart’s wording is general, with no separate threshold mentioned for investment loans specifically — so, on the published position, an investment loan and an owner-occupier loan hit the same LVR line. What no government body publishes, for either kind of borrower, is an actual LMI premium figure.

Moneysmart lists LMI as a cost without pricing it, and insurers such as Helia publish only an interactive estimator rather than a public rate card. If you want an indicative figure, run your own numbers through Helia’s LMI fee estimator — treat whatever it returns as one illustration tied to the inputs and date you used, never as a market rate.

A smaller deposit isn’t automatically the wrong call, and a larger one isn’t automatically the right one. Going in with less than 20% can mean entering the market sooner, at the cost of a bigger loan and, commonly, an LMI premium on top. Saving for longer avoids LMI and reduces the loan (and repayments) you’re carrying, at the cost of time. A mortgage broker or lender can model both paths against your actual numbers rather than a rule of thumb.

How does a lender decide if I can afford an investment loan?

Every residential loan in Australia — investment or owner-occupied — sits inside the same responsible-lending regime. ASIC’s Regulatory Guide 209 on responsible lending states that the obligations apply to credit provided for “personal, domestic and household purposes or for the purchase or improvement of residential investment property” — an investment loan isn’t a separate, lighter-touch category, it enters the same regulated-credit framework through its own limb of the law. Under it, a lender must make reasonable inquiries about your income and expenses, take reasonable steps to verify what you tell them, and assess whether you could meet the repayments without substantial hardship.

A few elements of that assessment work differently once rental income is part of the picture:

• Expected rental income is discounted, not counted in full. APRA’s guidance describes prudent bank practice as applying a minimum haircut of around 20% to expected rental income, with a larger discount where a property carries a higher risk of sitting vacant. This is regulatory guidance on what a prudent lender does — not a universal rule every bank applies identically, and individual lenders set their own policies within it.
• An interest-rate buffer sits on top of the loan’s actual rate. Banks are expected to test serviceability using the loan’s rate plus a buffer of at least 3 percentage points, under Prudential Standard APS 220 — applied to the new loan and to your existing debts, including your own home loan if you have one.
• Expense benchmarks like the Household Expenditure Measure (HEM) may be used to sanity-check what you’ve declared, but ASIC’s own guidance describes a benchmark as “a notional figure in substitution for making reasonable inquiries” — it’s a plausibility check, not a stand-in for your real, verified expenses.

None of this is set centrally for every lender. The exact interest-rate differential a bank charges investors, its maximum LVR for an investment loan, and any debt-to-income limit are policies each institution sets for itself inside this shared prudential framework — two lenders can look at the same application and land on different answers.

For context, not a forecast: the Reserve Bank held the cash rate at 4.35% at its June 2026 meeting (as at July 2026), and the RBA’s own lending statistics for May 2026 show investors paying, on average, around 0.2 percentage points more than owner-occupiers on new loans across the system — a system-wide average, not a quote from any individual lender, and not a prediction of where rates go next.

Principal and interest, or interest-only — how do investors choose?

Both structures exist within the same lending framework, and the choice is a trade-off rather than a should-I question:

	Principal & interest (P&I)	Interest-only (IO)
What each repayment covers	Interest plus a slice of the loan balance	Interest only, for a set period
Effect on the loan balance	Falls with every repayment	Stays flat during the IO period, then steps up when P&I repayments start
Common investor reason to consider it	Builds equity faster; often the lender’s default	Frees up cash flow during the IO period; some investors weigh this against other uses for that cash
Current regulatory stance	No numeric limit	No numeric cap as at July 2026 (history below)

APRA doesn’t currently cap interest-only lending by number. Between 2017 and 2019 it did: from March 2017, APRA expected banks to limit new interest-only lending to 30% of new residential mortgage lending system-wide, with extra scrutiny above 80% and 90% LVR. That benchmark was a temporary supervisory measure, and APRA removed it — in a phased way, bank by bank — from late 2018 into 2019, once industry-wide IO lending had fallen well under the 30% mark. As at July 2026, there’s no reinstated numeric cap; instead, APRA’s current guidance expects each bank to hold its own portfolio limits, to have “a sound and documented economic basis” before approving an IO loan to an owner-occupier, and to keep IO periods limited in duration — with serviceability still assessed against your ability to repay principal and interest over the loan’s real remaining term, not just the IO years.

Can I use the equity in my home instead of a cash deposit?

Some investors look at using equity in an existing property — often their home — instead of, or alongside, cash savings. Lenders sometimes do this by linking the new loan to the existing property as combined security, a structure generally called cross-collateralisation: two or more properties are used together as security for one loan or a group of linked loans, rather than each property standing behind its own separate loan.

The trade-off is structural, not a verdict either way. Linking properties can make it simpler to borrow against equity you already have without finding fresh cash. It can also make it harder to sell, refinance or discharge one property on its own later, because the lender’s security spans more than one asset and typically needs to review the whole linked position first.

Some investors and brokers prefer to keep each property’s loan and security separate for exactly that reason; others accept the linkage for the access to equity it provides. A mortgage broker can lay out how a specific lender structures this and what unwinding it later would involve — that detail varies lender to lender and isn’t something to assume from one example.

How does the loan interact with negative gearing, and does my ownership structure matter?

Tax outcomes depend on your circumstances — speak with a registered tax agent before acting.

Negative gearing isn’t a separate product — it’s a description of what happens when a rental property’s costs, including loan interest, exceed its rental income. As at July 2026, under current law, the ATO’s guide describes negative gearing as arising when “the rental income is less than the deductible expenses (including interest on the borrowings),” producing a net rental loss; you may be able to deduct that loss against your other income, such as salary, in the same tax return, and carry forward any amount your other income can’t absorb. There’s currently no general dollar cap on this and no requirement that the loss can only offset rental income.

That current-law position is due to change. Since royal assent on 26 June 2026, an enacted reform (a new section of the tax law) will, from the 2027-28 income year, quarantine future net rental losses on residential property so they can no longer be deducted against your other income — they’ll instead only be usable against residential rental income or gains, or carried forward. Interests you acquire from a contract entered into before 7:30pm AEST on 12 May 2026 are grandfathered under the current rules.

Widely held unit trusts and complying super funds are exempt from the quarantine. This is a genuinely different regime from the one operating now, and how it applies to any specific purchase is exactly the kind of question a registered tax agent should confirm against your own timing and structure.

How you hold the property matters too, and there’s no single “best” structure — each carries different tax and practical consequences:

Structure	What sits behind it
Individual	You’re assessed directly under your own marginal tax rates; an eligible Australian resident holding the asset 12+ months has access to the 50% CGT discount under current law
Company	The company holds the asset and its profits/losses are dealt with at the company level; companies don’t have access to the general 50% CGT discount
Discretionary/family trust	The trustee holds legal title; trust income is generally taxed in the hands of beneficiaries in proportion to their entitlement; an eligible trust retains the 50% CGT discount
Self-managed super fund (SMSF)	Subject to super-law rules the other three don’t carry — the sole purpose test, in-house asset limits and related-party restrictions — with a concessional 15% fund tax rate and a one-third CGT discount for eligible assets

No ATO or Moneysmart page ranks these structures or tells you which one to use — real-world outcomes depend on your specific entity or trust deed, any personal guarantees, and family or bankruptcy law considerations this article doesn’t cover.

An SMSF can borrow to fund a property purchase, but only through a Limited Recourse Borrowing Arrangement (LRBA) — a specific exception under section 67A of the Superannuation Industry (Supervision) Act 1993 to the fund’s general ban on borrowing. Under an LRBA, the trustee borrows to acquire a single asset (or an identical, same-value collection of assets) held on a separate trust, gaining the right to acquire legal ownership as instalments are paid; if the arrangement defaults, the lender’s rights are limited to that one asset — the fund’s other assets aren’t exposed. Meeting the LRBA borrowing rules doesn’t switch off the fund’s separate sole purpose test: an arrangement that gives a member or related party more than an incidental present-day benefit can still breach that test even where the borrowing mechanics themselves are followed correctly.

This is also changing for new arrangements. From 10 August 2026, under Schedule 5 of the same 2026 tax reform Act that carries the CGT and negative-gearing changes described above, a new SMSF LRBA can only use real property as its asset if that property is “business real property” — broadly, land or buildings used wholly and exclusively in a business — so from that date a new LRBA can’t be used to acquire an ordinary residential investment property. Existing residential-property LRBAs already in place aren’t wound up or affected; the restriction reaches only arrangements entered into on or after 10 August 2026, and SMSF borrowing itself isn’t being abolished — LRBAs over business real property, listed shares and other eligible assets continue. This combination of mechanics and the incoming restriction is exactly why SMSF property finance needs its own specialist advice before you commit to a structure — a registered tax agent or licensed financial adviser can confirm how both the sole purpose test and this changed borrowing rule apply to your fund.

If SMSF investment is on your radar, Moneysmart notes that anyone giving SMSF advice must hold an Australian financial services licence — check that before you act on it.

What other costs sit alongside the loan?

A few costs regularly catch first-time investors by surprise once the loan itself is sorted:

• Stamp duty — a one-off, state-government property-transfer tax, typically payable within about 30 days of settlement. The amount is set by each state and territory, not federally, so it’s worth checking your own state revenue office before you budget.
• Land tax — an ongoing, annual, state-set tax on land you own (separate from stamp duty), and one where an investment property commonly doesn’t get the exemption a principal home does. Thresholds, rates and even the basic structure of the tax differ significantly by state and territory and move with state budgets, so there’s no single national figure to quote — check the relevant state or territory revenue office for the property you’re considering.
• Foreign purchaser duty — if you’re not an Australian citizen or permanent resident, most states add a surcharge of roughly 7–9% of the property’s dutiable value on top of ordinary transfer duty; the ACT and Northern Territory don’t apply a purchase surcharge (the ACT instead applies an ongoing land tax surcharge). Definitions of “foreign person” and any exemptions differ by state — check the relevant revenue office directly.
• Property management fees, if you use an agent — the Real Estate Institute of Queensland (an industry body, not a government source) reports typical ongoing fees nationally in the rough range of 5–12% of rent, commonly 7–10%, plus a separate letting fee. No government body publishes a benchmark figure for this — it’s a negotiated commercial arrangement, so it’s worth comparing quotes from a few agents.
• Landlord insurance — an optional add-on covering things like loss of, or damage to, the leased property and lost rental income; it sits alongside, not instead of, ordinary building insurance. It isn’t a legal requirement, though your lender may separately require standard building cover.

Working out likely rental income against these costs is also where the two rental-yield formulas are useful — our guide to calculating rental yield sets out the gross and net formulas, and how the choice between cash-flow-positive and negatively geared outcomes plays out is covered in our guide to cash flow positive vs negatively geared property.

Is there a way into property investment that doesn’t need a large loan?

Taking out a mortgage isn’t the only way in. Fractional property investing splits a property’s economic value into smaller interests, so you can invest an amount sized to your own budget rather than borrowing for the whole property. On MyBrix — the platform behind this blog — retail investors can start from as little as $100 a month through NestEgg, with contributions accumulating until they can buy a whole Brix (a unit of fractional interest), as at July 2026. Entry points differ by platform and are disclosed in each product’s own Product Disclosure Statement, so treat any single figure — including MyBrix’s — as specific to that product, not a market standard.

This isn’t a substitute for understanding financing generally — a fractional interest is a different kind of asset from owning a property outright, with its own risks, costs and liquidity considerations. Our guide to property investment in Australia works through how the mechanics, costs and risks of property investing fit together, loan or no loan.

What should I do before applying for an investment loan?

A practical starting checklist, in roughly the order it tends to come up:

1. Talk to a mortgage broker or lender early — about your likely deposit, LVR and how your income (including any expected rental income) is likely to be assessed, before you’re under contract pressure.
2. Get a firm sense of your borrowing capacity, including the interest-rate buffer lenders apply, rather than assuming your budget stretches as far as an online calculator without a buffer suggests.
3. Compare loan structures — P&I vs interest-only, and whether cross-collateralising with an existing property makes sense for you — against your own numbers, not a general rule.
4. Get tax advice on ownership structure and gearing before you sign, particularly given the 2027-28 change described above — timing and structure both matter, and a registered tax agent can confirm how they interact for you.
5. Budget for the full cost stack, not just the loan — stamp duty, land tax, LMI if relevant, insurance and (if you’ll use one) a property manager.
6. Weigh whether a smaller-ticket fractional entry point suits you better than a mortgage-funded purchase, at least for a first step into the asset class.

None of this replaces individual advice — a mortgage broker, a licensed financial adviser and a registered tax agent each cover a different piece of the picture, and for a first investment property, most people end up needing all three.