Simple hacks to fund your investment deposit as ADF

How Much Deposit Do You Actually Need for an Investment Property?

Most lenders require a 20 per cent deposit for an investment property to avoid paying Lenders Mortgage Insurance. Borrowing above 80 per cent LVR is possible, but LMI premiums can add several thousand dollars to your upfront costs, and some lenders cap investor loans at lower LVRs during periods of tight lending policy.

Consider an ADF member stationed at Edinburgh who wants to buy a rental property while posted in South Australia. If the property is within the current median range for the Adelaide metro area, a 20 per cent deposit would typically fall between $90,000 and $110,000, depending on the suburb. Add stamp duty, which varies by state and transaction value, plus conveyancing and building inspection costs, and total upfront funds often reach $120,000 or more. That figure assumes no LMI. Drop below 20 per cent and the LMI premium gets added on top.

This is where ADF-specific loan products can shift the calculation. Some lenders waive LMI for Defence members on investment loans up to 90 per cent LVR, which reduces the cash deposit to 10 per cent and eliminates the insurance premium. On a property within Adelaide's median range, that might reduce the required deposit from $110,000 to around $55,000, with no LMI cost added.

Using Equity from Your Owner-Occupied Property

If you already own a home, you can use equity in that property to fund part or all of your investment deposit without selling or withdrawing savings. Equity is the difference between what your property is worth and what you owe on it. Lenders will typically let you access up to 80 per cent of your home's value, minus your existing loan balance.

In our experience, many ADF members posted to Adelaide or the Barossa region already own property in another state. If that property has increased in value or the loan has been paid down over several years, there may be enough accessible equity to cover the deposit and costs on a second property without needing any cash savings.

As an example, an Army member owns a property in regional New South Wales currently valued around $600,000, with $350,000 still owing. The lender will lend up to 80 per cent of the property's value, which is $480,000. Subtract the existing loan and the available equity is $130,000. That amount can be released and used as a deposit on an investment property in Adelaide, leaving the member's savings untouched. The equity release is secured against the New South Wales property, and the new investment loan is secured against the Adelaide property. Both loans sit separately but are managed as part of the same overall portfolio.

The equity route works particularly well when ADF members are building a portfolio across different states, which is common given posting cycles and the need to retain flexibility. Each property is assessed on its own serviceability, but equity from one can fund the next.

What Lenders Actually Assess When You Apply

Lenders assess investment loan applications differently to owner-occupier applications. Rental income from the property is included in your serviceability calculation, but it is discounted. Most lenders apply a 20 per cent haircut, meaning only 80 per cent of the expected rent is counted as income. Some lenders are more conservative and apply a 30 per cent reduction.

Your total debt is also tested at a rate at least 3 percentage points above the actual loan rate, which is the current APRA serviceability buffer. If the investment loan is offered at a variable rate around current levels, the lender will assess whether you can service it at a rate 3 percentage points higher. From 1 February 2026, lenders also operate under a debt-to-income lending limit, which caps the proportion of new loans they can write to borrowers with a DTI ratio of six times or more. That limit applies separately to investor and owner-occupier lending, and while most ADF applicants sit well below the threshold, it can affect approval if you are carrying significant other debt or applying for a large loan relative to your income.

If you are buying an investment property in Adelaide's inner suburbs or around areas like Salisbury or Elizabeth, where vacancy rates have historically been low, lenders will still apply the 20 per cent rental income discount regardless of how strong the local rental market appears. The discount is a fixed policy, not a reflection of the specific property.

How the New Negative Gearing Rules Affect Your Deposit Strategy

From the 2027-28 income year, losses on established residential investment properties purchased after 12 May 2026 can only be offset against income from other residential properties, not against salary or wages. Properties held at 12 May 2026, and eligible new builds purchased after that date, remain fully deductible under the old rules.

This changes the deposit decision for ADF members who are deciding between an established property and a new build. A new build still allows full negative gearing, meaning any shortfall between rental income and loan costs can be claimed against your ADF salary. An established property purchased now does not, unless you already owned it by mid-May 2026.

For members posted in South Australia who are considering new developments around Munno Para, Angle Vale or Concordia, the negative gearing exemption makes those properties more attractive from a tax perspective than an established dwelling in the same area. The upfront deposit requirement is the same, but the after-tax holding cost is lower if you can still claim the full loss each year.

If you are weighing up whether a larger deposit on an established property or a smaller deposit on a new build makes more sense, the tax treatment is now a material part of that calculation. The legislation is current and applies to contracts exchanged from mid-May 2026 onward. It does not apply retrospectively, and properties purchased before that date retain full negative gearing regardless of when they are sold.

Stamp Duty and Other Upfront Costs in South Australia

Stamp duty in South Australia is calculated on a sliding scale and applies to the full purchase price. There is no stamp duty concession for investment properties. For a property purchased within Adelaide's median range, duty will generally fall between $20,000 and $25,000, depending on the exact transaction value. That cost is payable at settlement and cannot be added to the loan. It must come from your deposit, equity release, or savings.

Other upfront costs include conveyancing, which typically runs between $1,500 and $2,500, building and pest inspections at around $500 to $800 combined, and lender application fees if applicable. If you are using an LMI waiver available to ADF members, there is no insurance premium. If you are borrowing above 80 per cent LVR without a waiver, the LMI premium could range from $5,000 to $15,000 or more, depending on loan size and LVR.

When calculating how much deposit you need, start with the property price, add 20 to 25 per cent to cover stamp duty and other costs, then subtract any equity or savings you can access. The remainder is what you need to fund, either through additional savings, a guarantor, or adjusting your purchase price.

Should You Split Your Loan Structure Between Fixed and Variable?

Many ADF investors split their loan between a fixed rate portion and a variable rate portion. A fixed rate locks in your repayment for a set period, which helps with budgeting and protects against rate increases during that time. A variable rate gives you flexibility to make extra repayments, redraw funds if needed, and refinance without break costs.

Splitting the loan 50/50 or 60/40 between fixed and variable gives you some rate protection and some flexibility. If rates rise, the fixed portion is unaffected. If rates fall, the variable portion benefits immediately. You can also make extra repayments on the variable portion without restriction, which helps pay down the loan faster or build a buffer for vacancy periods.

Some lenders allow offset accounts on the variable portion of an investment loan, though not all do. If you are using equity from your owner-occupied property to fund the investment deposit, keeping the variable portion with an offset lets you park any surplus cash and reduce interest without losing access to the funds. Interest on the investment loan remains deductible provided the borrowing is used to purchase or hold the rental property.

Interest-Only Repayments and How They Affect Serviceability

Most investment loans are structured with an interest-only period for the first one to five years. During that period, you pay only the interest component each month, which reduces your repayment and improves cash flow. Once the interest-only period ends, the loan reverts to principal and interest, and the repayment increases.

Lenders assess your serviceability based on principal and interest repayments, even if you elect to take an interest-only period. That means your borrowing capacity is not increased by choosing interest-only, but your actual monthly repayment is lower, which can help manage cash flow if the property is negatively geared.

Interest-only loans work well when you plan to use surplus income or rental growth to pay down other debt, such as your owner-occupied home loan, or when you expect the property to appreciate and plan to sell or refinance within a few years. They are less suitable if you want to build equity in the investment property itself, since no principal is being repaid during the interest-only period.

If you are using equity to fund your deposit and you want to rebuild that equity over time, a principal and interest structure on the investment loan helps you do that, though the repayment will be higher. The choice depends on your cash flow, tax position, and overall portfolio strategy.

What Happens If You Need to Refinance or Expand Your Portfolio Later

Once you own one investment property, you can use equity in that property to fund the deposit on a second, provided your income supports the additional borrowing. Lenders assess each new application based on your total debt position, including all existing loans, and your net rental income after applying the 20 per cent discount.

If you want to expand your property portfolio beyond one or two properties, serviceability becomes the main constraint, not deposit. Equity can continue to fund deposits, but each additional loan reduces your borrowing capacity for the next one. At some point, rental income alone is not enough to service further borrowing, and portfolio growth stalls unless your salary increases or you pay down existing debt.

Refinancing an existing investment loan can improve serviceability if you can secure a lower rate or better loan features, such as an offset account or higher redraw limit. Some lenders also offer rate discounts for portfolio investors or ADF members, which can reduce your repayment and free up capacity for additional borrowing. Investment loan refinancing is most effective when done before you apply for the next property, not after.

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