Using Your Equity to Buy an Investment Property
If you’ve paid down your home loan or your property has increased in value, you may be able to use your home’s equity to fund an investment property purchase.
Knowing how to leverage your equity can open the door to building a property portfolio but it’s important to weigh up both the opportunities and risks, especially with changing interest rates and market conditions.
As a local mortgage broker in Wollongong and the Illawarra, I often help clients unlock their equity to invest. Here’s what you need to know.
What is equity?
Equity is the difference between your property’s current market value and the balance remaining on your home loan.
For example, if your property is worth $1,000,000 and you owe $200,000, your equity is $800,000.
But not all equity is usable. Banks will usually lend you up to 80% of your property’s value, minus your existing loan balance.
In this case:
80% of $1,000,000 = $800,000
Subtract the $200,000 loan balance = $600,000 usable equity
In some cases, you may be able to borrow more if you pay for Lenders’ Mortgage Insurance (LMI).
Why use your equity to invest?
Using equity to purchase an investment property can be a powerful wealth-building strategy. Here are some of the main pros and cons.
✅ Pros
No need to save a deposit – equity can be used directly to fund your next property purchase.
Tax benefits – depending on your situation, you may be able to claim deductions such as loan interest, management fees, and maintenance.
Portfolio growth – benefit from long-term capital growth and potential rental income across multiple properties.
Boosted borrowing power – equity may allow you to purchase a higher-value property than you could with savings alone.
⚠️ Cons
Increased debt – borrowing against equity increases your repayments and overall debt exposure.
Market risk – if property values fall, your equity position could shrink or even turn negative.
Tax implications – capital gains tax (CGT) may apply when selling an investment property. Always consult your accountant.
How can you use equity to invest?
There are several ways to access your usable equity:
Refinance – replace your current mortgage with a larger loan, accessing the equity difference as funds.
Home loan top-up – increase your existing loan limit to free up equity.
Cross-collateralisation – use your home as additional security for the investment loan.
Line of credit – borrow flexibly against your equity and only pay interest on what you use.
Each approach has pros and cons depending on your goals, income, and risk appetite.
Like to know more?
Unlocking equity can be a smart way to step into property investment — but it’s not a one-size-fits-all strategy.
At Haus of Loans, we help clients across Wollongong and the Illawarra structure their finance in a way that supports their long-term goals.
Ready to explore how your equity could work for you? Get in touch today for tailored advice and investment loan options.