Can I Buy an Investment Property with 5% deposit?

Buying an investment property can be a smart way to build long-term wealth, but coming up with a deposit is often one of the biggest hurdles. While most investors assume they need at least a 10–20% deposit, you might be wondering: can you actually buy an investment property with just a 5% deposit?

Let’s break down what’s possible, what’s not, and how you can improve your chances if you're working with a small deposit.

Is It Possible to Buy an Investment Property with a 5% Deposit?

Short answer: yes, but only in very limited cases.

Most lenders in Australia prefer a minimum 10–20% deposit for investment properties, mainly because these types of loans are considered riskier than owner-occupied loans. That said, there are a few situations where you might be able to secure an investment loan with just 5% down—but it won’t apply to everyone.

Unlike first-home buyers, investors aren’t eligible for government schemes like the First Home Guarantee, which allows a 5% deposit without paying Lenders Mortgage Insurance (LMI). So even if a lender allows a low deposit, you’ll likely face higher upfront costs due to LMI.

What Do Lenders Typically Require for Investment Loans?

When applying for an investment loan, lenders will usually look for:

• A deposit of at least 10–20%
• Proof of stable income and employment
• Strong credit history
• Good rental yield from the property
• Low existing debts
• Sufficient cash flow to handle repayments

When your deposit is below 20%, you’ll generally need to pay Lenders Mortgage Insurance—a one-off premium that protects the lender if you default. For a 5% deposit, LMI can be tens of thousands of dollars, depending on the property value.

How Can You Buy an Investment Property with 5% Deposit?

Here are some workarounds that may allow you to invest with a low deposit:

1. Use Equity from Another Property

If you already own a home with equity, you might be able to use that as a deposit. This is one of the most common strategies investors use to buy with little or no cash deposit. Read this article to understand how it works, or speak to a mortgage broker who can guide you through the process, free of charge. Fill out the form below and an experienced broker will get in touch.

2. Guarantor Loans

Some lenders allow you to secure a loan with the help of a guarantor—often a parent who offers their property as security. This can eliminate the need for a cash deposit entirely as well as avoiding LMI.

3. Niche Lenders or Non-Bank Lenders

A handful of niche or non-bank lenders may be willing to accept a 5% deposit from strong applicants—especially those with high income and little debt. However, they typically charge higher interest rates. Speak to an experienced mortgage broker from EE Mortgages to find a suitable lender for your situation.

4. Build-to-Rent or Off-the-Plan Developments

In some cases, developers partner with lenders to offer low-deposit investment options—especially for off-the-plan properties. These deals often include incentives, but always read the fine print.

Risks of Buying with a 5% Deposit

While getting in the market early sounds attractive, there are some key risks you should consider:

• LMI costs can eat into your investment returns.

• You may end up with negative equity if the property value drops.

• Higher interest rates may apply, affecting your cash flow.

• You’ll have less borrowing flexibility in the future.

• Tighter rental yields may not cover repayments.

Low-deposit investing can work in a rising market, but it’s riskier during downturns or when interest rates rise.

What Are the Alternatives if You Don’t Have 20%?

If a 5% deposit isn't feasible or is too risky, you might consider:

• Partnering with another investor or family member to combine deposits

• Purchasing in a regional or more affordable area

• 'Rentvesting' – buy a home to live in (which qualifies for low-deposit schemes), then turn it into an investment later

• Saving longer and using that time to improve your borrowing position

Tips to Improve Your Chances of Loan Approval

If you still want to try your luck with a 5–10% deposit, here’s how to maximise your chances:

• Pay down other debts (credit cards, personal loans)

• Demonstrate a strong savings history

• Have stable, verifiable income

• Choose a property with strong rental yield

• Work with a mortgage broker who understands low-deposit investment lending

A good broker will help you compare options, identify flexible lenders, and package your application to highlight your strengths.

Final Thoughts

Can you buy an investment property with a 5% deposit in Australia? In rare cases—yes. But it comes with risks, higher costs, and stricter lending criteria.

For most investors, saving a 10–20% deposit (or using equity in another property) is a safer and more flexible strategy. However, if you're determined to enter the market sooner, it’s worth speaking to a mortgage broker to explore all your options.