Key takeaways
- “No deposit” usually means no cash deposit: the deposit is borrowed against equity in your home, or covered by a family guarantee.
- You still need to fund transfer duty and buying costs. Investors get no NSW first home concessions.
- Borrowing the whole price plus costs means a higher debt, bigger repayments and a thinner safety margin if prices fall.
- Interest on money borrowed to buy a rental can be deductible, but for established homes bought after 12 May 2026, losses won’t reduce your wage income from 1 July 2027.
- Keep the loans separate and a cash buffer in place before you buy.
Can you buy an investment property with no deposit? Not with no money at all, but many investors buy with little or no cash of their own. The deposit is borrowed against the equity in their home, covered by a family guarantee, or held over with a deposit bond until settlement. Each option has real costs and risks. Here’s how they work, with a worked example, and what the 2026 tax changes mean for investors.
What “no deposit” really means
Lenders still want security for the whole loan. What changes is where the deposit comes from. You also need to cover the costs of buying, and investors don’t get the NSW first home duty exemptions or concessions:
- Transfer duty on $750,000
- $27,937 at 2026–27 NSW rates
- Other buying costs
- Conveyancing, inspections, loan and registration fees
- Lenders mortgage insurance
- Usually applies above 80% of the value
- NSW land tax
- Above $1,075,000 of combined taxable land value
Check duty on any price with our NSW transfer duty calculator.
Option 1: use the equity in your home
Equity is the difference between your home’s value and what you owe. Lenders usually let you borrow up to 80% of the value without lenders mortgage insurance, so your usable equity is roughly 80% of the value less your current loan. That money becomes the deposit and costs, and a second loan covers the rest of the price.
Hypothetical example
Your home is worth $1,100,000 and you owe $500,000. Your usable equity is about $380,000 ($880,000 less $500,000). You buy a $750,000 established unit to rent out:
- a new loan split against your home of about $181,000 covers the 20% deposit ($150,000), transfer duty ($27,937) and about $3,000 of other costs
- an investment loan of $600,000 (80% of the price) covers the rest.
You’ve borrowed about $781,000, or 104% of the price. At a hypothetical 6.50%, the interest alone is about $50,760 a year. If the unit rents for $650 a week, that’s $33,800 a year before rates, strata, insurance, repairs and vacancies. You would need to fund a gap of about $17,000 a year before those costs and before tax.
The ATO looks at what borrowed money is used for, not which property secures it. In its own example, interest on money redrawn from a home loan to pay the deposit on a rental is deductible. Keeping the investment borrowing in its own split makes that easy to show.
Option 2: a family guarantee
A parent or other family member offers equity in their property as extra security, so you can borrow more than 80% of the price without a cash deposit. Not every lender accepts a guarantee for an investment purchase, so check early.
The guarantor takes on real risk. Moneysmart warns they may have to repay the guaranteed amount if you can’t, could lose the property they offered as security, and may find it harder to borrow themselves. They should get independent legal and financial advice before they sign. Our blog on family financing options goes into more detail.
Option 3: a deposit bond
A deposit bond is a guarantee you buy from an issuer that stands in for the cash deposit when you exchange contracts. It suits buyers whose money is tied up, for example in equity that isn’t released yet or a term deposit. The seller has to agree to accept it: NSW Fair Trading (opens in a new tab) notes that off-the-plan buyers can use one only if the developer agrees before signing. A deposit bond doesn’t reduce what you need at settlement, when the full price is due.
Want to know how much equity you can use?
Phillip can estimate your usable equity, structure the loans so they stay separate, and compare lenders’ investment policies for you.
The costs and risks of borrowing 100% or more
- Higher debt and repayments. Lenders assess the combined loans at your rate plus at least 3 percentage points, and they usually count only part of the expected rent.
- Less room if prices fall. With little equity in the investment, a fall in value can leave you owing more than it’s worth.
- Lenders mortgage insurance. Borrowing more than 80% of a property’s value usually means LMI. Read what LMI costs and how to avoid it.
- Cross-securing. If one loan is secured by both properties, the lender has a say over both when you sell or refinance. Separate loans secured by separate properties keep your options open.
Tax and the 2026 negative gearing changes
Interest on money used to buy a rental is generally deductible. Borrowing costs such as loan establishment fees, lenders mortgage insurance and valuation fees are claimed over five years (or the loan term, if shorter). Transfer duty isn’t deductible, but it’s added to the property’s cost base for capital gains tax.
In the example above, the yearly gap of about $17,000 would no longer reduce your tax on wages from 1 July 2027, so you’d fund it fully from your own income until the property earns enough to use the carried-forward losses. Get tax advice before you buy.
Is a low-deposit investment right for you?
- You can cover the cash flow gap from your income, even if rates rise or the property sits empty for a few weeks.
- You’ll still have an emergency buffer after the purchase.
- You’ve priced in duty, land tax, strata, insurance, repairs and property management.
- You understand whether the property is an established home or a new build for the new tax rules.
- You plan to hold for the long term.
If an interest-only period is part of the plan, read our guide to interest-only investment loans. For how we structure investment loans, see our investment property page.
Frequently asked questions
Yes, if your lender agrees and you can afford the combined repayments. Most lenders let you borrow up to 80% of your home’s value without lenders mortgage insurance, so your usable equity is roughly 80% of the value minus what you owe. The lender will value your home and assess your income, expenses and all your debts, including the new investment loan, at your rate plus a buffer.
It can be. The ATO looks at what the borrowed money is used for, not which property secures the loan. In its own example, an investor redraws from her home loan to pay the deposit on a rental, and the interest on that amount is deductible. Keep the investment borrowing in a separate loan split so the records are clean, and confirm your position with your accountant.
Yes. Transfer duty applies at the general rates, and the First Home Buyers Assistance Scheme only helps first home buyers who will live in the home. At the 2026–27 rates, duty on a $750,000 property is $27,937. Duty isn’t deductible against rent, but it forms part of the property’s cost base for capital gains tax. Use our NSW transfer duty calculator to check a price.
Sometimes. Family guarantees are more common for owner-occupied purchases, and not every lender accepts one for an investment, so check early. A guarantor can be asked to repay the guaranteed amount if you can’t, and could lose the property they used as security. Moneysmart recommends they get independent legal and financial advice before signing.
No. The Australian Government 5% Deposit Scheme is only for people who will live in the home as owner-occupiers, and investment properties are excluded. To buy an investment with a small deposit you’d usually pay lenders mortgage insurance, or use equity or a family guarantee instead. Buying an investment first can also affect your first home buyer benefits later.
Sources
- ATO: Rental properties, interest expenses (opens in a new tab)
- ATO: Rental properties, borrowing expenses (opens in a new tab)
- Budget 2026–27: Negative Gearing and Capital Gains Tax Reform explainer (opens in a new tab)
- Revenue NSW: How to calculate transfer duty (2026–27 rates) (opens in a new tab)
- Revenue NSW: Land tax thresholds and rates (opens in a new tab)
- Moneysmart: Going guarantor on a loan (opens in a new tab)
This article is general information only and doesn't take your objectives, financial situation or needs into account. Figures and eligibility rules change; check the official sources above or talk to us before you act. Keystone Home Loans Pty Ltd ATF BEMA Family Trust, Credit Representative Number 564704 is authorised under Australian Credit Licence Number 384704.
Written by
Phillip Bui
Founder and Principal Mortgage Broker at Keystone Home Loans, based in Arncliffe, NSW. Accredited Mortgage Broker and Full Member of the Mortgage & Finance Association of Australia (MFAA).
