Investment Deposit Mistakes & What Police Actually Need

Most lenders will accept a 10% deposit for an investment property, but you'll pay Lenders Mortgage Insurance and your borrowing capacity will be tighter than if you put down 20%.

If you're working rostered shifts and already own a home, you've probably thought about buying an investment property. The deposit question matters because it affects not just whether you can borrow, but how much the loan will cost you over time and whether you'll have enough serviceability to get the deal approved.

The 10% Deposit Option and What It Actually Costs

You can borrow with a 10% deposit for an investment property, but you'll need to pay LMI and demonstrate stronger serviceability than someone putting down 20%. LMI on a 90% loan to value ratio can add several thousand dollars to your upfront costs, and many lenders apply stricter income tests when your deposit is below 20%. In our experience, police officers with shift penalties and allowances often have the income to service a 90% loan, but the lender's assessment of that income varies depending on how consistently those penalties appear in your payslips.

Consider a senior constable looking to buy an investment property using a 10% deposit. They've saved the deposit from allowances and overtime, and their base salary is around $110,000 with penalties adding another $15,000 to $20,000 annually. Some lenders will assess 100% of shift penalties if they're consistent over 12 months, while others will only recognise 80% or less. That difference can mean the loan gets approved or declined, even with the same deposit.

How Equity in Your Home Changes the Deposit Equation

If you already own property, you can often use equity instead of cash savings to fund the deposit and avoid paying LMI if your combined loan to value ratio stays below 80%. This approach works particularly well for police officers who've owned their home for a few years and built up equity through repayments and capital growth. Rather than saving another 10% or 20% in cash, you leverage equity from your existing home to fund the deposit on the investment property.

The calculation works like this: if your home is worth $800,000 and you owe $500,000, you have $300,000 in equity. Lenders will typically let you borrow up to 80% of the property value, which is $640,000 in this scenario. That gives you $140,000 in usable equity, which can cover a 20% deposit on a property worth up to $700,000, plus some of the purchase costs. You'll need to check whether releasing that equity still leaves you with enough serviceability to cover both loans, especially if you're planning to hold the investment on an interest-only structure.

Genuine Savings Requirements for Investment Loans

Most lenders require at least 5% of the purchase price to come from genuine savings, even if you're using equity or a gifted deposit to make up the rest. Genuine savings means money held in your account for at least three months, and it excludes one-off windfalls like tax refunds or bonuses unless they're part of a regular pattern. If you're applying for a 90% investment loan without using equity, some lenders will want the entire 10% deposit to be genuine savings, not borrowed funds or a recent gift.

This requirement catches out police officers who've been paying down their owner-occupied home loan aggressively and don't have much sitting in a savings account. You might have $200,000 in equity and strong serviceability, but if you can't show 5% in genuine savings, some lenders will decline the application or ask you to wait until the savings period is satisfied. The solution is either to redirect some repayments into a savings account for three months before applying, or to work with a lender that accepts equity as a substitute for the genuine savings test.

The 20% Deposit Threshold and Why It Matters for Serviceability

Putting down a 20% deposit removes the need for LMI and gives you access to better investor interest rates, but the real benefit is serviceability. Lenders apply a rental income haircut when assessing investment loans, typically recognising only 80% of the expected rental income to account for vacancy and maintenance costs. If your loan to value ratio is 90%, the higher loan amount combined with that rental income discount can push your serviceability to the limit, especially if you're also carrying an owner-occupied mortgage.

At a 20% deposit, your loan amount is lower, which means your investment property repayments are lower, and you'll often find it easier to get the loan approved even if your income includes variable shift penalties. Some police officers will use a guarantor loan structure where a parent or family member provides security to avoid LMI, but that approach still requires the borrower to service the full loan amount, so it doesn't solve a serviceability issue.

How the 2026 Budget Changes Affect Deposit Decisions

From 1 July 2027, established residential investment properties purchased after 12 May 2026 will be subject to new negative gearing and capital gains tax rules. If you bought an established property after Budget night, you won't be able to claim rental losses against your salary from 1 July 2027, and the 50% CGT discount will be replaced with an inflation-indexed calculation and a 30% minimum tax on gains. New builds are exempt from the negative gearing changes, and investors in new construction can choose between the old 50% CGT discount and the new indexed approach.

This affects your deposit decision because it changes the after-tax return on different property types. If you're buying an established property now, you need a higher deposit or stronger rental yield to ensure the property doesn't drag on your cash flow once negative gearing is restricted. If you're buying a new build, the tax treatment remains more favourable, which might justify borrowing at 90% LVR if the rental income and capital growth projections support it. The rules are complex, and the way they interact with your specific income and roster pattern is worth discussing with a tax professional before you commit to a purchase.

Interest-Only Structures and How They Change Your Borrowing Capacity

Many investors choose an interest-only loan structure for the first few years to maximise cash flow and tax deductions. Lenders will assess your ability to service the loan on a principal and interest basis, even if you're applying for interest-only repayments, so the structure doesn't increase how much you can borrow. What it does change is your cash flow once the loan is approved, which can be the difference between holding the property comfortably and needing to sell if you hit a vacancy period.

If you're borrowing at 90% LVR with a 10% deposit, the interest-only repayments will be higher than if you'd put down 20%, and the rental income might not cover the loan cost. That shortfall comes out of your pocket each month, and if you're also servicing an owner-occupied mortgage, it can stretch your budget. Some police officers in this position will start with a 10% deposit and then refinance to release equity once the property has increased in value, bringing the LVR down below 80% and reducing the interest rate and repayment cost.

What NSW Police Officers Should Consider Before Applying

NSW Police officers have access to LMI waivers and discounted rates through certain lenders, but those benefits typically apply to owner-occupied loans, not investment loans. You'll still need to meet the standard deposit requirements for investment lending, and the LMI waiver that might let you buy your own home with a 5% deposit won't carry over to an investment purchase. Some lenders do offer small rate discounts for police officers on investment loans, but the difference is usually only 0.10% to 0.20%, not the larger discounts available on owner-occupied borrowing.

If you're planning to buy an investment property while still renting, known as rentvesting, your serviceability will be assessed differently because you'll have rental costs on your own housing as well as the investment property costs. Lenders will factor in your current rent as an expense, which reduces your borrowing capacity compared to someone who already owns their home. In that scenario, a larger deposit or a lower-priced property might be necessary to get the loan across the line.

Call one of our team or book an appointment at a time that works for you. We'll look at your income, existing debts, and the type of property you're considering, and work out what deposit size makes sense for your situation without overselling you on a loan structure that doesn't fit your roster or your plans.

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