Smart ways to approach deposit size and loan structure

The deposit you save determines which loan products you can access, what your repayments will look like, and whether you'll pay LMI. For self-employed borrowers and working professionals in Bondi, where the median house price sits around $5,350,000 and units at $1,460,000, deposit size often shapes the entire lending conversation.

How lenders calculate your deposit and assess what counts as genuine savings

Lenders look at both the dollar amount and the source. A 20% deposit means you borrow 80% of the property value, which sits below the threshold that triggers LMI and gives you access to wider loan products and stronger rate discounts. Anything below 20% usually means LMI applies unless you qualify for a waiver or professional package.

Genuine savings must be held in your name for at least three months and built through regular contributions or salary deposits. Lenders want to see a pattern of disciplined saving, not a lump sum that appeared overnight. A self-employed buyer purchasing a unit in Bondi at the current median would typically need around $290,000 to reach a 20% deposit, though some lenders will accept as little as 5% under the Australian Government 5% Deposit Scheme if the buyer qualifies and the property sits below the $1,500,000 cap for NSW capital cities and regional centres.

Consider a buyer who runs their own consulting business and has saved $80,000 over two years through monthly transfers from their operating account into a dedicated savings account. That $80,000 counts as genuine savings. A $50,000 gift from a parent declared on a statutory declaration may also be acceptable, but most lenders will still want to see at least 5% of the deposit coming from the buyer's own verified savings. The combination gets the buyer to a 10% deposit on a unit valued around $900,000, putting them in range for a low deposit home loan with LMI.

What self-employed borrowers need to show when deposit funds come from business accounts

Self-employed buyers often hold savings across multiple accounts, including business operating accounts, offset accounts linked to commercial loans, and personal savings accounts. Lenders treat funds differently depending on where they sit and how long they've been there.

Funds transferred from a business account to a personal account within 90 days of application are usually queried. Lenders want to confirm the transfer represents genuine retained earnings, not a temporary shift of working capital that will need to be returned to the business. Two years of business tax returns and a letter from your accountant confirming the funds are not required for ongoing operations will usually satisfy this.

In a scenario where a Bondi-based buyer operates a small creative agency and has accumulated $150,000 in their business offset account over three years, the lender will ask for business transaction statements covering at least three months, recent BAS statements, and confirmation from the accountant that withdrawing those funds won't impair business operations. Once verified, the funds count as genuine savings and can be used as deposit. If the same buyer also holds $50,000 in a personal savings account built through regular salary drawings, that portion is treated as straightforward genuine savings without additional verification.

Deposit size and how it affects the interest rate and loan features you can access

The loan-to-value ratio drives pricing. A borrower with a 20% deposit accessing an 80% LVR loan will typically receive a rate discount of 10 to 20 basis points compared to a borrower at 90% LVR, and a further discount of 10 to 15 basis points compared to a borrower at 95% LVR. Those differences compound over a 30-year loan term.

Loan features also vary by LVR. Offset accounts, redraw facilities, and the ability to split between fixed and variable portions are standard at 80% LVR and below. At 90% LVR, some lenders restrict offset accounts or charge a higher annual fee to include them. At 95% LVR, offset accounts are often unavailable entirely, and the product range narrows to a handful of lenders willing to write high-LVR loans with LMI.

For a working professional buying in Bondi Junction with a 10% deposit, the choice might come down to two or three lenders offering 90% LVR loans with LMI, compared to fifteen or more lenders competing for the same borrower if they can lift their deposit to 20%. Rate, features, and flexibility all improve as LVR falls.

Using equity from another property instead of cash savings

Borrowers who already own property can use equity as a deposit without selling. If you own a unit in Paddington valued at $1,100,000 with a $400,000 loan against it, you have $700,000 in equity. Lenders will typically allow you to borrow up to 80% of that property's value, which gives you access to $880,000 in total lending. Subtract the existing $400,000 loan and you have $480,000 available to use as a deposit and cover costs on a new purchase.

This approach means no LMI on the new purchase if you keep the combined borrowing at or below 80% of each property's value. It also means you're not liquidating savings or selling an existing asset. The risk is that you now have two properties secured against each other, so serviceability and ongoing repayment capacity matter even more.

In our experience, buyers using equity often underestimate settlement costs and buffer requirements. Lenders still want to see three to six months of liquid reserves after settlement, particularly for self-employed borrowers whose income can fluctuate. If all your available equity is committed to the deposit, you may be asked to demonstrate additional savings or access to a line of credit before the loan is approved. Structuring this correctly from the start, often with support from a broker familiar with equity release strategies, avoids delays at assessment.

How deposit size interacts with borrowing capacity for self-employed buyers

Serviceability calculations don't change based on deposit size, but a larger deposit reduces the loan amount, which in turn reduces the income you need to service the loan. A self-employed buyer applying for a $1,200,000 loan will need to demonstrate higher net profit after add-backs than a buyer applying for $1,000,000, even if they're purchasing the same property.

Lenders assess self-employed income using tax returns, usually averaging the most recent two years. If your net profit was $180,000 one year and $160,000 the next, the lender will average to $170,000 and apply a serviceability buffer at an interest rate 3.0 percentage points above the loan product rate. A larger deposit means a smaller loan, which means the required income to meet serviceability drops.

For buyers stretching to enter the Bondi market, lifting the deposit from 10% to 15% can be the difference between conditional approval and outright decline, particularly where recent-year income has been variable. Borrowing capacity improves as the loan amount falls, and in tight serviceability scenarios that improvement can be material.

What happens when you combine savings, family gifts, and the First Home Guarantee

First home buyers can layer multiple sources to reach the required deposit. The Australian Government 5% Deposit Scheme allows eligible buyers to purchase with 5% genuine savings. Lenders participating in the scheme will accept a family gift to top up that 5%, provided the buyer meets the scheme's eligibility criteria and the property sits below the regional price cap.

A first home buyer in Bondi looking at a unit valued at $950,000 would need $47,500 as a 5% deposit. If they've saved $35,000 as genuine savings and receive a $15,000 gift from a parent, they meet the deposit requirement. The lender assesses their income, applies the serviceability buffer, and if approved, Housing Australia provides a guarantee to the lender for up to 15% of the property value. The buyer avoids LMI and enters the market sooner.

State stamp duty concessions also apply. In NSW, a full transfer duty exemption applies to first home buyers purchasing new and established homes valued up to $800,000, with a sliding concession on properties between $800,001 and $1,000,000. A buyer purchasing at $950,000 would receive a partial concession, reducing upfront costs by several thousand dollars and easing the pressure on cash reserves at settlement.

Deposit requirements for investment property compared to owner-occupied loans

Lenders apply higher scrutiny to investment loans, particularly at higher LVRs. Most lenders will write investment loans up to 90% LVR with LMI, but the rate loading is steeper than for owner-occupied loans and serviceability is tested more conservatively. Investment income from the property being purchased is usually shaded by 20%, meaning the lender only credits 80% of the expected rent when calculating serviceability.

A 20% deposit on an investment loan not only removes LMI but also opens access to interest-only repayment structures, offset accounts, and rate discounts that aren't available at 90% LVR. For a working professional in Bondi looking to hold their primary residence while purchasing an investment property in Bondi Junction, the difference in rate and structure between an 80% LVR loan and a 90% LVR loan can be 30 to 40 basis points and the loss of offset functionality.

We regularly see buyers stretch to 20% on investment purchases specifically to retain offset capability and keep the loan portable if they decide to sell and reinvest within a few years. The upfront savings effort pays off in flexibility and cost over the loan term.

When a guarantor can replace part or all of the cash deposit

A family member, usually a parent, can offer property they own as security to cover the shortfall between your deposit and the 20% threshold. The guarantor's property acts as additional security, allowing the lender to write the loan at 100% of the purchase price without requiring LMI in some cases.

The guarantor is liable only for the guaranteed portion, not the entire loan. If you're purchasing a property valued at $1,200,000 with a $100,000 deposit, the lender might ask the guarantor to secure $140,000, covering the shortfall to 20% and providing a small buffer. The guarantor's property must have sufficient equity and the guarantor must meet the lender's age and income criteria.

Guarantor arrangements work well when the buyer has strong serviceability but limited savings, which is common among younger professionals in high-income roles or self-employed buyers in growth phase. Once the buyer builds equity through repayments or capital growth, the guarantee can be released. Structuring this properly from the outset, with independent legal advice for the guarantor, is non-negotiable. More detail on how these arrangements work is available on our guarantor loans page.

You'll want to talk through your savings position, income structure, and timeline before you start looking at properties. Call one of our team or book an appointment at a time that works for you.

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