Avoid These 5 Mistakes with Your Investment Deposit

Using All Your Savings Without Holding Reserves

Putting every dollar into the deposit leaves you exposed when settlement costs arrive or your tenant moves out.

Ambulance Victoria paramedics with shift work already know income timing matters. A rental property adds another layer of cash flow risk. Consider a paramedic buying a two-bedroom unit in Footscray at the current median for that suburb. The deposit might be 15 per cent to avoid Lenders Mortgage Insurance. Settlement then adds stamp duty, conveyancing, building inspection, and bank fees. If the property sits vacant for three weeks while you find a tenant, you still owe the mortgage repayment. Emptying your savings to maximise the deposit means borrowing short-term to cover those costs or missing repayments in the first month.

Lenders want to see genuine savings that remain after the deposit is paid. Most will ask for at least three months of total loan repayments, including your owner-occupied mortgage if you have one, sitting in an accessible account at settlement. That figure includes the new investment loan repayment on a principal and interest basis, even if you plan to switch to interest only later. For a paramedic holding a $450,000 owner-occupied loan and taking out a $320,000 investor loan, genuine savings of around $12,000 to $15,000 after settlement gives lenders confidence and gives you breathing room if the first tenant is late with rent.

Assuming a 10 Per Cent Deposit Will Always Clear the Lender

A 10 per cent deposit might meet the loan to value ratio, but it does not automatically meet serviceability or the debt-to-income cap.

From February this year, lenders operating under APRA's prudential standards can only approve 20 per cent of new investor loans at a debt-to-income ratio of six times or more. If your total borrowings, including the new investment loan, reach six times your gross annual income, you fall into that restricted 20 per cent bucket. Some lenders have tightened their own policies further and decline applications above five times income regardless of deposit size. In our experience, Ambulance Victoria paramedics earning a base salary of $85,000 to $95,000 before overtime hit that ceiling faster than they expect when adding an investor loan to an existing home loan.

Consider a scenario where a paramedic earns $90,000 gross, holds a $380,000 owner-occupied mortgage, and wants to borrow $340,000 for an investment property with a 10 per cent deposit. Total debt sits at $720,000, which is exactly eight times income. That application will be declined by most lenders under the debt-to-income cap, even though the loan to value ratio on the investment property is 90 per cent and acceptable. The solution is either a larger deposit to reduce the loan amount, or waiting until the owner-occupied loan is paid down further. Paramedics rostered on consistent overtime can sometimes include that income if it has been steady for at least 12 months, but lenders will shade it by 20 to 50 per cent depending on their policy.

Borrowing Against Equity Without Checking the Cross-Collateralisation Terms

Using equity from your owner-occupied property to fund the deposit sounds efficient until you try to refinance one property and realise both are locked together.

Many Ambulance Victoria paramedics already own a home in Melbourne's middle or outer suburbs. Equity release lets you access the value tied up in that property without selling. The lender registers a mortgage over both your home and the new investment property, and the total loan to value ratio across both properties usually cannot exceed 80 per cent without Lenders Mortgage Insurance. The issue is not the cost. The issue is that you cannot sell, refinance, or restructure one property without the lender's consent on both. If you want to refinance your owner-occupied loan to a lower rate in two years, the new lender will need to take on both properties or you will need to repay enough of the investment loan to release the cross-collateralisation.

A paramedic who owns a home in Werribee valued at $600,000 with a $250,000 mortgage has $350,000 in equity. The lender allows them to borrow up to 80 per cent of the property value, which is $480,000, minus the existing $250,000 loan. That gives $230,000 in available equity. Using $60,000 of that equity as a deposit on a $300,000 investment property in Melton means both properties are now security for a combined loan of $540,000. When negative gearing rules change from 1 July 2027 under the Treasury Laws Amendment (Tax Reform No. 1) Act 2026, you might want to sell the Melton property and buy a new build to retain access to negative gearing. If the Werribee property is still cross-collateralised, you will need to refinance or repay part of the loan before that sale can settle.

Paying Lenders Mortgage Insurance on a Deposit You Could Have Increased

Lenders Mortgage Insurance protects the lender, not you, and it can add $10,000 to $15,000 to the amount you borrow without delivering any benefit to your cash flow or tax position.

Ambulance Victoria employees have access to LMI waivers through several lenders when buying an owner-occupied property, but those waivers do not extend to investment loans. If your deposit is less than 20 per cent, you will pay LMI unless you bring the loan to value ratio down. The premium is calculated on the loan amount and the LVR, and it is usually capitalised into the loan rather than paid upfront. That means you pay interest on the LMI premium for the life of the loan. A $15,000 LMI premium capitalised into a 30-year loan at current variable rates adds around $800 to $900 a year in interest alone.

Paramedics often believe they need to buy immediately to avoid missing the market. Waiting an additional six months to build the deposit from 12 per cent to 20 per cent might feel like lost time, but it removes the LMI cost entirely and increases your serviceability for future purchases. If you are earning $92,000 and saving $1,500 a month after tax and living costs, an extra $24,000 takes 16 months. If property values rise 4 per cent in that period, the price increase on a $400,000 property is $16,000. The LMI saving is $12,000 to $14,000. You have still come out slightly behind on paper, but your loan to value ratio is lower, your repayments are smaller, and your borrowing power for the next property is stronger. That compounding effect matters more than the timing of one purchase.

Choosing the Deposit Size Based on What You Have Rather Than What the Loan Structure Needs

The deposit is not just about getting the loan approved. It sets your interest rate, your LMI cost, your offset strategy, and your ability to add a second investment property later.

A 15 per cent deposit clears LMI with some lenders under their specific investor policies, but it might lock you into a higher interest rate tier. A 20 per cent deposit removes LMI across all lenders and opens access to rate discounts that can be 0.15 to 0.30 percentage points lower than a loan at 80 to 85 per cent LVR. On a $350,000 loan, a 0.20 percentage point discount saves around $700 a year. Over ten years, that is $7,000 before compounding. The decision to stretch the deposit from 15 per cent to 20 per cent might delay the purchase by six months, but it improves cash flow from settlement onward and protects your borrowing power when you want to buy the second property.

Ambulance Victoria paramedics rostered across metro and regional stations sometimes overlook the fact that borrowing capacity for a second investment loan depends on how the first loan is structured. If the first property is on a principal and interest loan at 85 per cent LVR with no offset, the repayment is higher and your surplus income for servicing a second loan is lower. If the first property is at 80 per cent LVR on an interest only loan with an offset account holding your savings, the repayment is lower and the offset reduces the interest cost without locking up capital. When you apply for the second loan, the lender assesses the actual repayment on the first property, not the rental income. Structuring the deposit and the loan correctly from the start makes the second property possible without waiting another five years.

The rules around negative gearing, capital gains tax, and debt-to-income limits have all shifted in the last 18 months. Ambulance Victoria paramedics buying an investment property for the first time need to get the deposit structure right, not just sufficient. Call one of our team or book an appointment at a time that works for you.

Frequently Asked Questions