For many Australian property investors, the biggest barrier to purchasing their next investment property is not income — it’s the deposit. But if you already own a home or existing investment property, you may already have the deposit you need sitting in the equity of your current property. Here’s how to unlock it.
What Is Equity?
Equity is the difference between the current market value of your property and the amount you still owe on your mortgage. For example, if your home is worth $900,000 and you have a $450,000 mortgage, your equity is $450,000.
However, you can’t access all of that equity. Most lenders will only allow you to borrow up to 80% of the property’s value (to avoid paying Lenders Mortgage Insurance), so the amount available to you — called your usable equity — is calculated as follows:
Usable Equity = (Property Value × 80%) − Outstanding Loan Balance
Using the example above: (900,000 × 80%) − 450,000 = $720,000 − $450,000 = $270,000 in usable equity.
How Much Investment Property Can You Buy With That Equity?
Your usable equity can cover the deposit and purchase costs of an investment property. A useful rule of thumb: for every $100,000 in usable equity, you could potentially buy an investment property worth around $500,000 (using the equity as a 20% deposit).
| Your Usable Equity | Potential Investment Property Value |
|---|---|
| $150,000 | ~$750,000 |
| $200,000 | ~$1,000,000 |
| $270,000 | ~$1,350,000 |
| $350,000 | ~$1,750,000 |
Keep in mind that you will also need to fund purchase costs — stamp duty, legal fees, inspections — which can add 3–5% on top of the property price. Make sure your usable equity covers both the deposit and these additional costs.
How to Access Your Equity
There are several ways to access the equity in your existing property:
1. Refinance and Top Up Your Existing Loan
You refinance your current mortgage to a higher loan amount, releasing the difference as cash (or a line of credit) to use as the deposit on your investment property. This is the most common approach and often delivers the best overall rate outcome.
2. Equity Line of Credit / Home Equity Loan
A line of credit secured against your property allows you to draw funds as needed, up to your approved limit. You only pay interest on what you draw down. This is flexible but requires discipline — the “revolving credit” nature means it can be easy to overspend.
3. Cross-Collateralisation
Some lenders offer to cross-collateralise your properties — using both your existing property and the new investment property as security for the combined debt. While this simplifies borrowing, it creates significant risk: the lender controls both properties, making it harder to sell one property independently and reducing your future flexibility. Most experienced investors and brokers recommend avoiding cross-collateralisation where possible.
Step-by-Step: Using Equity to Buy an Investment Property
- Get a current valuation — your lender or broker can arrange a desktop valuation or formal bank valuation of your existing property to establish current market value.
- Calculate your usable equity — using the formula above. Your broker can do this for you.
- Assess your borrowing capacity — equity covers the deposit, but you still need to service both the top-up loan and the new investment loan. Your income and existing commitments will determine how much you can borrow.
- Choose your loan structure — decide whether to refinance your existing loan or add a separate equity loan. This decision has important tax implications (mixed-purpose borrowing can complicate deductibility).
- Apply for finance — your broker submits the application and coordinates the valuation, approval, and settlement of both the equity release and the investment property purchase.
Tax Considerations
Interest on money borrowed to purchase an income-producing investment property is generally tax-deductible. However, if you mix investment borrowing with personal (owner-occupier) borrowing in the same loan, the tax position becomes complicated. Always structure equity releases carefully — ideally keeping investment and personal debt in separate loan accounts — and get advice from your accountant before proceeding.
Talk to an Investment Finance Specialist
At Tenfold Property Finance, we help Australian investors unlock the equity in their existing properties to fund their next purchase. We’ll calculate your usable equity, assess your borrowing capacity, and recommend the right loan structure — so you can move quickly when the right property comes up.
Back to: The Ultimate Guide to Investment Property Loans in Australia