If you have equity in your home
With equity we can borrow the full purchase price plus costs. This usually works out to be around 105% of the purchase price.
The loan is typically structured into two parts. First, is a loan secured against the property to be purchased for 80% of the value. This allows us to avoid Lenders Mortgage Insurance. The second part is a loan secured against your existing property for 25% of the purchase price. Both loans are for investment purposes even though one might be secured against your home.
The advantage of this is that you don’t need to save a deposit and also the interest on your investment loan is a tax deduction.
Without equity we will need to save up a deposit. For investment properties we need a 15% deposit, of which 5% has to have been genuinely saved/held for three months. The 15% is comprised of 10% loan deposit plus 5% for costs. Note that there are lenders that require a lower deposit however they charge higher interest rates.