Can I borrow to purchase an income property without a deposit if the equity in the property I am buying is high enough?
Most banks in most countries will lend you up to 80% of the value of the property without you paying extra Loan Mortgage Insurance (LMI). Some banks may lower this percentage for certain types of properties or properties in certain areas if they are considered a higher risk.
So if a property is say valued at $200,000 then a bank will generally lend you $160,000 without LMI. If you do not want place a cash deposit then you will need to have enough equity in another asset (usually another house) to cover the deposit amount.
So in order to cover the $40,000 deposit as per the scenario above, you would need to have at lease $50,000 equity in another property, as 80% of $250,000 is $200,000. So you would need to take out a mortgage over both of the properties to avoid paying a cash deposit.