The easiest way to get an investment deposit together

Getting your deposit together is usually the biggest hurdle when you're looking at buying an investment property.

Most lenders require a deposit of at least 20 per cent of the property value to avoid paying Lenders Mortgage Insurance (LMI) on an investment loan. If you're buying in or around Toongabbie, where the market includes everything from older fibro cottages through to renovated family homes near the rail line, that deposit can vary quite a bit depending on what you're targeting. The good news is that there are several ways to get there, and not all of them involve waiting years to save cash.

How much deposit do you actually need for an investment property?

You'll need a minimum deposit of 20 per cent to avoid LMI on most investment loans. If you're borrowing with a smaller deposit, LMI becomes payable and is calculated on a sliding scale based on your loan amount and loan to value ratio. At 10 per cent deposit, you're looking at a much higher premium than at 15 per cent.

Say you're considering a property near the Toongabbie shopping precinct. A 20 per cent deposit means you'll need genuine savings or equity, plus another amount set aside for stamp duty, conveyancing, building and pest inspections, and any initial property setup costs. You can't borrow stamp duty on an investment purchase in New South Wales, so that cost sits outside your loan amount.

Using equity from your home to fund the deposit

One of the most common ways to fund an investment deposit is by releasing equity from an existing property you own. If you own a home in Toongabbie or nearby and have paid down some of your mortgage, you may be able to access that equity without selling.

Lenders will typically let you borrow up to 80 per cent of your home's current value, minus what you still owe. Consider a homeowner in Toongabbie whose property has increased in value since they bought it. They owe less than half the current value on their mortgage. They can access the difference between 80 per cent of that value and their remaining loan balance, and use that amount as a deposit on an investment property.

The equity doesn't need to come from your own home. Parents or other family members sometimes offer equity from their property as security, though this does require everyone involved to understand the risks and obligations. We regularly see this structure used where an investor is getting started and doesn't yet have enough equity in their own name.

Saving a cash deposit and what counts as genuine savings

If you're building a cash deposit from scratch, lenders want to see that the money has been saved over time rather than appearing suddenly in your account. Genuine savings are funds held in your name for at least three months, usually in a savings account, term deposit, or offset account. A tax refund, sale of assets, or a gift from family can sometimes count, but each lender has different rules.

For an investor borrowing at higher loan to value ratios, showing genuine savings becomes more important. It's one of the ways lenders assess whether you can manage mortgage repayments and build a buffer for vacancy periods or repairs.

The role of rental income in your borrowing capacity

Lenders will include a portion of the expected rental income when they assess how much you can borrow for an investment property. Most lenders apply a shading rate, typically between 70 and 80 per cent of the gross rent, to account for vacancy periods and other holding costs.

Toongabbie sits close to the train station and Parramatta, which makes it popular with renters working in the CBD or Parramatta. A two-bedroom unit or older-style house close to transport can generate steady rental demand. That income helps with serviceability, but it doesn't change the deposit you need upfront. The rental income calculation affects how much the lender will let you borrow, not how much cash or equity you need to bring to settlement.

What happens when your deposit is under 20 per cent

If you have a deposit below 20 per cent, you can still proceed with an investment loan, but you'll pay LMI and the lender's assessment becomes stricter. Some lenders will go as low as 10 per cent deposit for investment purchases, but you'll need strong serviceability and a solid credit history.

LMI premiums are calculated by the insurer and passed on to you as a one-off cost. You can capitalise the premium into your loan amount, which means you don't pay it upfront, but it does increase what you owe and the interest you'll pay over time. In New South Wales, stamp duty may also apply to the LMI premium itself, depending on the jurisdiction.

Structuring your loan to match your tax and cash flow needs

Once your deposit is sorted, the way you structure the loan matters. Interest-only repayments are common on investment loans because they reduce your monthly outlay and maximise your tax-deductible interest. Most lenders offer interest-only periods of up to five years on investment lending.

You can split your loan between fixed and variable rates to balance repayment certainty with flexibility. Some investors prefer to keep the loan fully variable so they can make extra repayments from surplus rental income or offset the balance using a linked account. Others lock in a portion of the loan to smooth their cash flow, especially if they're managing multiple properties.

If you're using equity from your home and cash savings together, it's worth setting up separate loan splits so that the debt relating to your investment remains clearly quarantined. That makes it much clearer at tax time which interest is deductible and which isn't.

Timing your purchase and managing settlement costs

Your deposit needs to be available at exchange of contracts, and the balance of your funds, including stamp duty, must be ready by settlement. In New South Wales, settlement usually happens four to six weeks after exchange, though it can be longer if you negotiate an extended settlement period.

Stamp duty in New South Wales for investment properties is calculated on the full purchase price with no concessions. Foreign investors face an additional surcharge, and foreign ownership of established dwellings is currently restricted under federal rules, with limited exceptions. If you're a permanent resident or citizen, those restrictions don't apply, but you'll still need to factor in the state-based duty.

You'll also need to budget for conveyancing, building and pest inspections, a property valuation if the lender orders one separately, and any strata reports if you're buying a unit. Toongabbie has a mix of freestanding homes and older-style apartment blocks, and each comes with different upfront investigation costs.

Borrowing capacity and the debt-to-income cap

From February 2026, lenders can only write up to 20 per cent of new investment loans to borrowers with total debt of six times their income or more. That cap applies across the lender's portfolio, not to you individually, but it has changed the way some lenders assess high-DTI applications.

If your income is strong and your debts are low, this won't affect you. But if you already have a mortgage, car loan, and other commitments, you may find that some lenders are more cautious, especially if your total proposed borrowing pushes you above that six-times threshold. It doesn't mean you can't borrow, but it may mean your choice of lender or loan structure needs adjusting.

We work with lenders right across the panel, and different institutions have different appetites depending on your profile and the security you're offering. If one lender says no, another may say yes based on how they model your income and expenses.

Call one of our team or book an appointment at a time that works for you. We'll talk through your situation, work out how much deposit you'll need, and help you pull together a loan structure that fits your goals and your tax position. Whether you're using savings, equity, or a combination of both, we'll make sure everything is lined up before you start looking at properties in Toongabbie or anywhere else.

Frequently Asked Questions