• 95% Investment Home Loan
  • How much deposit do I need to buy an investment property?
  • Using equity to buy investment property
  • 5% deposit investment home loan
Free phone quote


5% deposit investment home loan


Applying for a 5% Deposit Investment Home Loan


If you are looking for a 5% deposit investment home loan, there are lots of options out there, and finding the right lender and applying for the loan you want is not always an easy or fast process. Here’s a few facts about the application process, and a tip or two on how to save some money over the duration of your loan.


What are the criteria for a 5% deposit investment home loan?


There are eligibility requirements for applicants for any type of 5% deposit investment home loan:


  • Having genuine savings for the deposit. Lenders might require to show that your deposit comes from genuine savings, which usually means that the total amount of the 5% deposit needs to have been kept in a bank account (or term deposit or other approved source such as shares) for three months without depreciation in value.
  • Good employment history. A stable employment history is essential for loan approval.
  • Excellent credit history. A clean credit history with no major defaults is essential. If you have had defaults in the past, these should have been paid off in full.


What role do rental yields play in the application process?


A common question from property investors concerns the role of rental yields in the application process. Lenders do consider rental yields when calculating how much you can borrow. They usually determine the permitted loan amount by factoring in the likely rental yield on your property. Negative gearing may also be a factor. Therefore, when looking for the right lender for your 5% deposit investment home loan, you will want to make sure that your chosen investment property and your circumstances meet the lender’s requirements.


Two strategies for freeing up investment funds


As a property investor, you are undoubtedly interested in options that enable you to free up more cash and funds to direct into other investments, or to make your investments more tax effective. Two easy ways you can do this include opting for an interest-only period for your repayments, and by paying your interest on your 5% deposit investment home loan in advance:


  • Interest-only repayments. Depending on the lender and the product, you may be able to opt for a five or 10-year interest-only repayment period. This allows you to free up funds to direct into other investments. Rather than making principal repayments (which can be significant on a month-to-month basis), you can opt for paying the interest component only, for a fixed period of time. You can then use the funds to pay off another investment property, buy another property, or for personal enjoyment.
  • Paying interest in advance. Another mortgage strategy for making your investments more effective is to pay all of your annual interest in advance. If you are expecting a higher income than usual this year, you can reduce your tax liability by paying all your annual interest in the current financial year. This can also be helpful if you have realised a capital gain in the current year. If you plan on using this strategy, you should make sure that your loan allows for this, and choose the right loan before committing.


How do I apply for this type of loan?


If you need some help in getting started on finding the right 5% deposit investment home loan, contact ABC Mortgages today for a free discussion. Our representatives will take you through the entire process, including your eligibility and understanding the type of paperwork you need to provide to support your loan application.