How to Use Your Home Equity to Buy an Investment Property

This guide is general information only, not financial advice. We're buyer's agents, not brokers or financial advisers. Always speak to a licensed mortgage broker and accountant before making any financing decisions.

You Might Already Have Your Deposit

If you own a home, you could be sitting on the deposit for an investment property without realising it. Many Australians go from one property to two not by saving a second deposit from scratch, but by using the equity their home has built up over time.

This is one of the most common ways property investors get started. Here's how it works in plain terms.

What Is Equity?

Equity is the difference between what your home is worth and what you still owe on it.

Example: Your home is worth $900,000. You owe $500,000 on the mortgage. Your equity is $400,000.

That equity isn't cash in your bank account. It's value locked inside your property. But lenders may allow you to use a portion of it as security when borrowing for an investment property. Best way to understand this is speaking to a good broker!

How Much Equity Can You Access?

Most lenders will let you borrow up to 80% of your home's current value. The difference between that 80% figure and your existing loan balance is your usable equity.

Here's how the general calculation works:

Your home's value	$900,000
80% of value	$720,000
Minus existing mortgage	-$500,000
Usable equity	$220,000

That $220,000 could potentially be used toward the deposit and costs on an investment property, without you needing to touch your savings.

Your broker will run this calculation using your actual numbers and a current valuation of your home. The result depends on your property's current market value and how much you've paid down.

What if you have less equity?

If your usable equity is smaller, say $50,000 to $80,000, it might still be enough. A $550,000 investment property with a 10% deposit needs $55,000 plus costs. Your broker can show you exactly what your equity supports.

How the Process Generally Works

The mechanics vary between lenders, but here's the general idea.

Option 1: Increase your existing home loan

Some homeowners increase (or "top up") their current home loan to release equity. The additional funds are then used as the deposit for the investment property, which has its own separate loan.

Option 2: Set up a separate line of credit

Other lenders set up a separate facility secured against your home. This keeps things cleaner because the equity release is in its own account, separate from your home loan.

Option 3: Cross-secure with a new lender

In some cases, a new lender provides the investment loan and takes security over both properties. This can work, but it links your properties together, which may limit your flexibility later.

Which option is right? This depends on your existing loan, your lender, and your long-term plans. Your broker and accountant can advise on which structure suits your situation, particularly around how it affects tax treatment and future borrowing.

A Realistic Scenario

Here's an example of how this might play out. These are illustrative numbers only, not a recommendation.

Starting position:

• Home value: $850,000

• Mortgage owing: $450,000

• Usable equity (80% of value minus debt): $230,000
  

Investment purchase:

• Property price: $580,000 (house in a Melbourne growth suburb)

• Deposit needed (20%): $116,000

• Stamp duty and costs: ~$30,000

• Total cash needed: ~$146,000
  

In this scenario, the usable equity covers the deposit and purchase costs, with room to spare. The investor hasn't dipped into savings at all.

The investment property gets its own loan for the remaining $464,000. Rental income helps service that loan. The exact cash flow depends on rates, rent, and holding costs, which is why running the numbers with your broker is essential.

What Lenders Consider

Accessing equity isn't automatic. Lenders will assess:

Your income and serviceability. Can you afford repayments on your existing home loan plus the new investment loan? They'll stress-test at rates above the current rate to make sure you have a buffer.

Your home's current value. The lender will order a valuation (or use an automated estimate) to confirm what your home is worth today. If property values have dropped in your area, your usable equity may be less than you expect.

Your credit history. Same as any loan application. Clean payment history, no defaults, and reasonable existing debts.

The investment property itself. They'll assess the property you're buying to make sure it meets their lending criteria and is worth the purchase price.

Things to Think About

Your home loan repayments may change

If you increase your home loan to release equity, your repayments on that loan will go up. Make sure you're comfortable with the higher amount before proceeding.

You're taking on more debt

Using equity means you're borrowing more overall. The investment property's rental income can help cover the new loan, but you need to be comfortable that your total debt level is manageable, especially if interest rates change or if you have a vacancy period.

Loan structure matters

How the equity release and investment loan are set up can affect your tax position, your flexibility, and your ability to borrow again in the future. This is a technical area where getting advice from both a broker and an accountant before you commit makes a real difference.

Your home is being used as security

When you use your home's equity, your home is part of the security arrangement. Understand what this means for your situation and discuss it with your broker.

Who This Works Best For

Using equity to invest generally suits people who:

• Have owned their home for several years and built up meaningful equity

• Have stable income that can support additional borrowing

• Want to start building an investment portfolio without waiting years to save another deposit

• Are thinking long term (7 to 10+ years) and understand that property values move in cycles
  

It's less suited if you've only recently bought your home, have very little equity, or are already stretched on your current repayments. Your broker can give you a straight answer on whether the numbers work.

What You Can Do With the Investment

Once you've used equity to purchase an investment property, you've got options depending on your strategy.

Hold and rent. The most straightforward approach. Buy in a high-yield area, put a tenant in, and let the rental income cover most or all of the holding costs while the property grows in value over time.

Buy and develop. If you buy a property on a larger block with the right zoning, you may be able to subdivide and build a second dwelling on the back while keeping the existing home on the front. This creates two separately titled properties from one purchase, building equity through development rather than just waiting for the market. Our buy-and-develop playbook explains how this works.

Build a portfolio. Your first investment property builds its own equity over time. In a few years, that equity (combined with your home equity) might support a second investment purchase. This is how many Australians build a multi-property portfolio step by step.

Where to Invest

You don't have to buy in the same city you live in. Some of the strongest opportunities for investors right now are interstate, where entry prices are lower and rental yields are higher.

We buy across NSW, VIC, QLD, and WA from one team. If you're a Sydney homeowner looking to invest in Melbourne's growth corridors or Queensland's regional centres, we handle the property search, negotiation, and settlement without you needing to fly interstate.

The right location depends on your budget, your strategy, and your goals. That's what a strategy session is for.

The First Step

Talk to your broker and find out how much usable equity you have. That number changes everything because it tells you whether you can act now or need more time.

Once you know your budget, talk to us about where to invest it. We'll show you which markets and property types match your numbers, whether that's a straightforward rental or a buy-and-develop opportunity.

We're buyer's agents. We find the right property and negotiate the deal. Your broker handles the finance. Your accountant handles the tax. Together, that's the team.

Book a free strategy call and we'll help you figure out the next move.