What Deposit Is Required for Investment Loans in Victoria and Can a Broker Assist?

By Lowest Interest Rates Australia

Introduction

When I bought my first investment property in Victoria, I thought I had it all figured out. I’d done my research, calculated my rental yield, and even found the perfect property in a growing suburb. Then my broker asked me one simple question: “How much deposit are you planning to put down?” I froze.

That was the moment I realised that understanding how deposits work for investment loans isn’t as straightforward as it sounds. Sure, I knew I’d need one—but I didn’t know how much, what affected it, or how I could make my money work harder. Luckily, my broker stepped in to guide me through it all.

If you’re looking to buy an investment property in Victoria, this guide will walk you through exactly how deposits work, what percentage lenders usually expect, how factors like LVR (Loan-to-Value Ratio) come into play, and how a broker can help you save time and potentially thousands of dollars.

Table of Contents

1. Understanding Deposits for Investment Loans
2. How Much Deposit Do You Need for an Investment Property in Victoria?
3. Factors That Affect How Much Deposit You’ll Need
4. Understanding Lenders Mortgage Insurance (LMI)
5. Using Equity Instead of Cash for Your Deposit
6. How a Mortgage Broker Can Help You Secure an Investment Loan
7. Case Study: How a Broker Helped a Victorian Investor Secure a Property
8. Tips to Build a Bigger Deposit Faster
9. Common Pitfalls to Avoid When Arranging Your Deposit
10. Final Thoughts – Work with Lowest Interest Rates

Understanding Deposits for Investment Loans

Before we dive into numbers, let’s clarify what a deposit actually is. In simple terms, your deposit is your share of the property purchase price that you pay upfront. The rest is covered by your lender via the investment loan. Your deposit size impacts how much you can borrow, your loan terms, and even the interest rate you receive.

For investment properties, lenders generally see loans as higher risk compared to owner-occupied homes. That’s because investment income can fluctuate, and there’s always the potential for vacancy or market downturns. As a result, the deposit requirements for investment loans are usually higher than for home loans.

How Much Deposit Do You Need for an Investment Property in Victoria?

The golden rule for investment property loans in Victoria is this:

Most lenders require a deposit of at least 10–20% of the property’s value.

Here’s how it typically breaks down:

• 20% deposit (LVR 80%): The ideal scenario. You avoid Lenders Mortgage Insurance (LMI) and often qualify for the most competitive interest rates.
• 10–15% deposit (LVR 85–90%): Many lenders will still consider you, but you’ll likely need to pay LMI. This can add thousands to your costs.
• 5% deposit: Rare for investment loans, but possible if you have strong income, excellent credit, and other supporting factors. Usually, only select lenders allow this.

Let’s say you’re buying a $600,000 investment property in Melbourne:

• 20% deposit = $120,000
• 10% deposit = $60,000 (plus LMI)
• 5% deposit = $30,000 (plus LMI, stricter conditions)

It’s also worth noting that lenders look beyond just the deposit. They’ll assess your overall financial situation, income stability, and debt-to-income ratio (DTI) before deciding how much they’re willing to lend.

Factors That Affect How Much Deposit You’ll Need

Your required deposit isn’t just a flat figure—it depends on several personal and market factors, including:

1. Your Credit Score

Borrowers with excellent credit scores often get access to lower deposit requirements and better rates. If your credit history shows late payments or high debt, expect lenders to ask for a higher deposit.

2. Loan-to-Value Ratio (LVR)

Your LVR represents how much you’re borrowing relative to the property’s value. For example, if you’re borrowing $480,000 for a $600,000 property, your LVR is 80%. The lower your LVR, the less risk for the lender—and the better your loan terms.

3. Type of Property

Some property types (like apartments under 50m², rural properties, or high-density developments) are considered riskier. Lenders often require larger deposits for these.

4. Investment Experience

If you’re a first-time investor, some lenders might require a slightly larger deposit compared to experienced investors with multiple properties.

5. Income and Employment Type

Stable, full-time employment is more attractive to lenders than freelance or casual income. Self-employed borrowers may need to provide additional documentation and sometimes higher deposits.

Understanding Lenders Mortgage Insurance (LMI)

If you’re putting down less than a 20% deposit, you’ll almost certainly need to pay Lenders Mortgage Insurance (LMI). LMI protects the lender, not you, in case you default on your loan.

In Victoria, LMI can add anywhere from a few thousand to tens of thousands of dollars to your total loan cost, depending on your loan size and deposit. The good news is that your broker can help calculate the LMI cost upfront and sometimes even find lenders that offer LMI discounts or waivers for certain borrower profiles.

💡 Pro tip: LMI can often be capitalised (added to your loan), meaning you don’t have to pay it upfront—but this does increase your total loan balance slightly.

Using Equity Instead of Cash for Your Deposit

If you already own property, you might not need to save a cash deposit at all. You can use the equity in your existing home to fund your next investment purchase.

For example, if your current home is worth $900,000 and you owe $500,000, you have $400,000 in equity. Most lenders will let you use up to 80% of that value—meaning you could potentially access $220,000 to put toward your investment property deposit and costs.

Using equity strategically can help you build a property portfolio faster—but it’s important to structure it correctly. A mortgage broker can help you unlock this equity safely and ensure you’re not overleveraged.

How a Mortgage Broker Can Help You Secure an Investment Loan

Investment loans can be complex. From lender requirements to varying deposit thresholds, trying to handle it all alone can be overwhelming. This is where a mortgage broker becomes invaluable.

Here’s how brokers like Lowest Interest Rates help:

• Compare multiple lenders: Brokers have access to dozens of lenders, including big banks and non-bank lenders, giving you more options than going direct.
• Tailored advice: They assess your financial situation, goals, and investment plans to recommend the right loan structure.
• Negotiate better deals: Brokers often have access to exclusive offers or lower rates not advertised publicly.
• Equity strategy: If you’re using existing equity, they’ll structure your loan to minimise risk and maximise borrowing potential.
• Save time and stress: They manage paperwork, communicate with lenders, and ensure your loan application is strong and compliant.

Simply put, a broker helps you save time, avoid costly mistakes, and access deals that might otherwise be out of reach.

Case Study: How a Broker Helped a Victorian Investor Secure a Property

Meet Olivia, a Melbourne teacher who owned her first home in Coburg and wanted to invest in a second property. She had some savings but wasn’t sure if it was enough for a deposit.

She approached Lowest Interest Rates, and her broker quickly identified that she could use the equity in her current home for her deposit. By refinancing her existing mortgage, Olivia accessed $120,000 in usable equity—enough to cover a 20% deposit on a $600,000 investment property in Geelong.

Her broker handled the refinance and new loan simultaneously, negotiated a competitive fixed rate, and ensured Olivia didn’t need to pay LMI. Within eight weeks, she settled on her new property—and started earning rental income immediately.

Tips to Build a Bigger Deposit Faster

If you’re still working toward your investment deposit, here are some practical strategies:

• Automate your savings: Set up a direct debit into a high-interest savings account each payday.
• Reduce existing debts: Pay off credit cards or personal loans—this improves both your borrowing power and your DTI ratio.
• Cut unnecessary expenses: Review subscriptions and entertainment costs for quick wins.
• Consider side income: Freelancing, part-time work, or selling unused items can accelerate your savings goal.
• Talk to a broker early: Even before you’re ready to buy, a broker can help you estimate exactly how much you’ll need and create a plan to get there.

Common Pitfalls to Avoid When Arranging Your Deposit

Even experienced investors can make mistakes when organising deposits. Here are some pitfalls to watch out for:

• Not budgeting for extra costs: Don’t forget stamp duty, legal fees, and property inspections—they can add 5–7% to your total purchase cost.
• Relying solely on unstable income: Lenders want to see consistent income streams, not just occasional overtime or bonuses.
• Overextending equity: Using too much of your existing property’s equity can leave you vulnerable to market fluctuations.
• Assuming every lender is the same: Deposit requirements can vary greatly—some may require 25% depending on the property type.
• Skipping professional advice: Trying to “DIY” your loan may lead to missed opportunities or costly errors.

Final Thoughts – Work with Lowest Interest Rates

So, what deposit is required for investment loans in Victoria—and can a broker help? In most cases, you’ll need a deposit of 10–20%, depending on your situation, credit history, and the lender’s criteria. But the good news is, you don’t have to figure it out alone.

The expert team at Lowest Interest Rates helps Victorian investors secure the right loan for their goals. Whether you’re using cash savings, equity, or a combination of both, their brokers will compare lenders, negotiate rates, and handle all the details—so you can focus on growing your portfolio, not stressing over paperwork.

🏠 Ready to take the next step? Visit LowestInterestRates.com.au today to speak with an experienced Melbourne mortgage broker who can help you secure your next investment property with confidence.