How to Use Your Home’s Equity to Buy an Investment Property

Jasmeet Deogun
Oct 12
2 min read

What is Home Equity?

Equity is the portion of your home that you truly own. It’s calculated by taking your property’s current market value and subtracting the remaining balance on your home loan.

Example:

Home Value: $900,000

Loan Balance: $500,000

Equity: $400,000

From this amount, lenders may allow you to access a percentage (often up to 80%) - known as usable equity - which can potentially be used to fund an investment property.

If you’ve owned your home for a while, there’s a good chance you've built up equity. With the right strategy, that equity can become a powerful tool to grow your property portfolio.

Step 1: Confirm your property's current value

Start with a realistic estimate of what your home is worth today.

Use online valuation tools or look at recent sales in your area.
Request an appraisal from a local real estate agent.
Your broker can arrange a formal bank valuation when needed.

Why this matters: Lenders base your usable equity on this valuation.

Step 2: Calculate your usable equity

Usable equity is the portion you can borrow against.

Most lenders allow borrowing up to 80% of your home's value (policy dependent).
Accessing more than 80% may attract Lenders Mortgage Insurance (LMI).
Your broker can calculate a clear figure based on your situation.

Step 3: Check your borrowing capacity (comfort first!)

Even with usable equity, you want lending that feels manageable.

Lenders assess income, expenses, debts, and future rate rises.
Plan for contingencies like interest rate changes or rental vacancies.

Tip: A comfort check now helps protect your financial well-being later.

Step 4: Compare loan options & structures

This is where your broker helps shape a smart strategy.

Refinance or equity release vs a separate investment loan
Interest-only vs P&I (Principal & Interest)
Fixed, variable, or split rates
Offset accounts and redraw for flexibility
Avoid complex cross-collateralisation unless suitable

Each structure has pros and cons — a broker will explain the best fit for your goals.

Step 5: Apply and move to settlement

Once you’ve chosen your path:

Gather documents (ID, payslips, statements, rates notice)
Obtain pre-approval if property shopping
Finalise loan choice and sign documents
Your broker manages the process through to settlement

Allow for costs: valuation fees, LMI (if applicable), conveyancing, and purchase costs like stamp duty.

Risks & things to consider

Property market changes can impact equity
Cash flow pressure from vacancies or rate rises
Tax impacts such as negative gearing, require professional advice

How a broker helps

✔ Calculates usable equity and borrowing power

✔ Compares multiple lenders and structures

✔ Guides loan setup to match your goals

✔ Handles paperwork and negotiation with lenders

Quick pre-meeting checklist

Latest home loan statement
Property value estiamte or appraisal
Income documentation
Other loans/credit cards summary
Your investment goals and plans

💬 Ready to explore what your equity can do for you? Let’s get started on our journeys together.

General information only. This is not financial or tax advice. Please consider your circumstances and seek professional advice before making decisions.