If you already own a home, there is a good chance your minimum equity for investment property is closer than you think. In 2025 many Australian homeowners are sitting on sizeable equity thanks to years of growth and principal repayments. The practical question is not “do I have equity?” but “how much usable equity do I need to safely buy my first investment, and what is the smartest way to access it?”
This guide explains the numbers in plain English. You will learn how lenders calculate usable equity, what deposit levels work for investors at different Loan to Value Ratios (LVRs), how much to allow for purchase costs, how the serviceability buffer affects your borrowing, and how to reduce risk while you leverage your home. At the end you will find a simple decision flow and clear next steps.
Equity 101: the part you can actually use
Equity is the gap between your home’s current market value and your loan balance. Lenders do not usually let you draw all of it. As a rule of thumb, banks are most comfortable if your total loans stay at or below 80% of the property’s value, which means your usable equity is calculated as:
Usable equity = 80 percent of your home’s value − your current loan balance.
That 80% ceiling exists for a reason: it helps you avoid Lenders Mortgage Insurance (LMI) when you refinance to release equity, and it leaves a buffer if prices soften. Real-world policies vary by lender and by your overall profile, but the 80% convention is a reliable baseline.
How much equity do you need for an investment deposit?
There is no single “right” number, because your minimum equity for investment property depends on the purchase price, your target LVR, and whether you are prepared to pay LMI. Below are realistic paths investors use in 2025.
Path 1: 20% deposit plus costs (no LMI)
- Who it suits: investors who want to minimise risk, keep monthly costs down, and avoid LMI.
- What you need: equity (or cash) equal to 20% of the purchase price, plus funds for stamp duty and buying costs. A 20% deposit typically avoids LMI.
Example
Target purchase price: $650,000
Deposit at 20%: $130,000
Estimated costs: allow ~4–6% for stamp duty, legal, building and pest, lender fees and adjustments. Exact stamp duty varies by state and concessions, so check your state revenue calculator.
Path 2: 10% deposit with LMI
- Who it suits: investors who have strong income and buffers, want to enter sooner, and accept the trade-off of LMI.
- What you need: equity (or cash) equal to 10% of the price plus costs and the LMI premium, which can be capitalised into the loan subject to lender rules. LMI is usually required above 80% LVR.
Indicative LMI range
For a $600,000 investment with a 10% deposit, some lenders quote LMI in the order of $10,000 to $15,000, though actual premiums depend on the lender, LVR and your profile.
Path 3: 90% LVR with LMI (selected lenders)
- Who it suits: investors with solid serviceability and buffers who want to conserve equity.
- What you need: 10% deposit plus costs, which may mean more total borrowing after capitalising LMI. A small number of lenders will consider 90% LVR for investment loans.
Important
Higher LVRs mean higher LMI and less wriggle room if values dip, so build a robust cash buffer and stress-test repayments.
The other upfront: buying costs you should plan for
Beyond the deposit, plan for:
- Stamp duty: varies by state and property price, and concessions are limited for investors. Use your state or territory revenue calculator to estimate your duty.
- Conveyancing/legal, building and pest, strata records: budget realistically.
- Lender and government fees, settlement adjustments: allow a margin.
A practical planning range for total buying costs is ~4–6% of the price in many investor scenarios, but always price it precisely for your state and property because duty is the biggest variable.
Worked examples: translating equity into a purchase
Below are simplified scenarios to help you sanity-check whether your current equity will be enough. They assume an 80% usable equity cap on your home and do not include complex tax or structuring nuances.
Scenario A: equity release to buy at 20% deposit
- Home value $900,000, home loan $500,000
- Usable equity at 80%: 0.80 × $900,000 − $500,000 = $220,000
- Comfortable target purchase: $800,000 investment
- Deposit at 20%: $160,000
- Estimated costs at 5%: $40,000
- Total equity required: $200,000
- Result: your $220,000 usable equity covers the deposit and costs, and still leaves a small buffer.
Scenario B: equity release to buy at 10% deposit with LMI
- Home value $800,000, home loan $420,000
- Usable equity at 80%: 0.80 × $800,000 − $420,000 = $220,000
- Target purchase: $700,000 investment
- Deposit at 10%: $70,000
- Estimated costs at 5%: $35,000
- Indicative LMI: price- and lender-specific; say $12,000–$18,000 in many cases
- Total equity or cash required: ~$105,000–$123,000
- Result: you still hold some usable equity in reserve, which can remain in an offset as your buffer.
Scenario C: conservative buy using partial equity
- Home value $1,000,000, home loan $650,000
- Usable equity at 80%: 0.80 × $1,000,000 − $650,000 = $150,000
- Target purchase: $600,000 investment
- Deposit at 20%: $120,000
- Costs at 5%: $30,000
- You are $0 short on paper, but you would have no cash buffer.
- Safer approach: reduce target price or add cash savings so you can retain a three to six month expense buffer after settlement.
Serviceability will decide your ceiling, not just equity
Even if you have plenty of equity, the bank still assesses whether you can afford the total debt. In 2025 lenders are continuing to stress-test your repayments by adding 3 percentage points to the interest rate that applies to the loan. That “serviceability buffer” can materially reduce how much you can borrow, which in turn affects the realistic purchase price your equity can support.
Practical takeaway: ask your broker to model repayments at today’s rate, at +1%, and at +2%, then confirm your budget still works after including insurance, rates, management fees, and a maintenance allowance. If it does not, aim for a lower price or contribute more equity.
What is a sensible minimum equity for investment property?
Use these guardrails to frame your target.
- Comfort-first approach: aim to fund a 20% deposit plus all costs from equity or cash. This avoids LMI, keeps repayments smaller, and provides the most resilience to market moves.
- Balanced approach: fund a 10% deposit plus costs, accept LMI as the price of earlier entry, and keep a strong cash buffer. This is common in 2025 for income-secure investors who want to conserve equity but still buy quality.
- Accelerated entry with selected lenders: consider 90% LVR where your income and buffers are strong and you understand the LMI and higher repayment impact. This path is available with some lenders and requires careful structuring.
No matter which path you choose, avoid the trap of using every dollar of equity for the deposit and costs. A cash buffer equal to three to six months of total property outgoings materially reduces holding risk.
How to access your equity in 2025
There are two common ways to turn paper equity into available funds.
1) Top-up on your existing home loan
You keep your lender and apply to increase your loan limit. This is often faster if your lender’s rate and features remain competitive.
2) Refinance to a new lender and release equity
You move to a sharper rate and structure, and release equity at the same time. Many investors use a separate loan split for the deposit and costs, and the main split for the investment purchase. That separation keeps your records clean and helps your accountant track deductible and non-deductible interest.
Whichever route you take, lenders will run a valuation to confirm your property’s current market value, and they will usually calculate usable equity at 80% of value minus the loan balance.
Risk controls that keep your investment safe
Having the equity is only half the story. Staying safely invested is the other half.
- Buffer: park your buffer in an offset account linked to your home or investment loan so it reduces interest while remaining accessible.
- Insurance: landlord insurance plus appropriate building and contents cover are essential for investors.
- Loan structure: interest-only on the investment loan can improve cash flow; principal and interest reduces risk over time. Choose deliberately.
- Location quality: low vacancy, diverse employment, solid amenities, and sensible dwelling type.
- Annual review: renegotiate rates, review rent, check insurance cover, and re-test cash flow at higher rates.
Common pitfalls that inflate the equity you think you need
- Forgetting buying costs: stamp duty and legals are part of the equity or cash you need; do not budget for deposit only.
- Chasing the highest price you can “afford”: your goal is to buy well, not to buy at the ceiling of your approval.
- Using every dollar of usable equity: leaves no resilience for repairs, vacancies, or rate changes.
- Assuming every lender treats investors the same: LVR caps, LMI pricing, and cash-out rules differ widely.
- Relying on online value estimates: your lending capacity rides on the bank valuation, which can be higher or lower than automated estimates.
Decision flow: do you have enough equity today?
- Estimate your usable equity: 80% of your home’s value minus your current loan balance.
- Choose a path: 20% deposit with no LMI, 10% deposit with LMI, or 90% LVR with selected lenders.
- Price the costs: model stamp duty and other buying costs for your state.
- Stress-test borrowing: confirm serviceability at +3 percentage points as per current guidance.
- Check your buffer: ensure three to six months of holding costs remain in cash after settlement.
- Proceed or adjust: if the numbers are tight, scale down the purchase price, add more cash, or wait while you build equity.
FAQs
Is there a legal minimum equity for investors?
No, there is not a legal minimum. The practical minimum is set by lender LVR policies and by your willingness to pay LMI. Many investors aim for 20% deposit plus costs to avoid LMI, while others accept 10% plus LMI where the cash flow still works.
Can I invest with less than 10% deposit?
It is uncommon for investment lending in 2025. A small number of lenders may consider 90% LVR with LMI and strong serviceability, but policies vary and risks increase as LVR rises.
Why does everyone talk about 80%?
Because at or below 80% LVR you usually avoid LMI and you preserve a valuation buffer, which makes refinancing and future equity releases easier.
How does the APRA buffer affect me?
Even if you have the equity, lenders still test if you can afford your loans at an interest rate 3 percentage points higher than the actual rate. This often becomes the real cap on your buying power.
The bottom line
Your minimum equity for investment property is not a single national number. It is the amount of usable equity that lets you pay the deposit and costs for the price point your income can safely support after serviceability stress tests, while still leaving a sensible cash buffer. For many first-time investors in 2025, that looks like either:
- 20% deposit plus all costs funded from equity or cash, or
- 10% deposit plus costs with LMI, backed by strong serviceability and a healthy buffer.
Choose the path that keeps you confidently invested through market cycles, not just the one that gets you in the door fastest.
Next steps
Try our calculators or book a call. We will:
- Calculate your usable equity across one or more properties.
- Model your borrowing capacity under the current +3 percentage point serviceability buffer.
- Price deposit and costs for your target state and property price.
- Recommend a loan structure and buffer that match your goals.
Take the guesswork out of your next move and turn your home equity into a strategy that is safe, sensible and scalable.
About Facto Financial
Facto Financial Group is an independent, client-first brokerage helping Australians make smarter property and finance decisions. From first home buyers and migrants to seasoned investors, we specialise in clear advice, sharp loan structures, and end-to-end support that makes the process simple.
Based in Perth and serving clients nationwide, our team compares dozens of lenders to secure the right product, rate and features for your goals. We focus on sustainable borrowing, cash-flow resilience, and portfolio growth strategies that stand up over time.
Looking for a trusted Mortgage Broker Stirling? Book a friendly chat with our brokers today. We can assess your borrowing power, map out deposit or equity options, and recommend a tailored loan structure. Prefer to speak in another language? Ask for a bilingual consultation.