Using Your Home Equity to Buy an Investment Property

August 13, 2025

Using Equity to Buy an Investment Property

If you’ve paid down your mortgage or your property has grown in value, you might be in a position to use your home equity to buy an investment property.
This strategy can help you enter the investment market sooner or grow your existing portfolio but it’s important to understand how it works and the risks involved.

In this guide, we’ll cover:

• What home equity is (and how to calculate it)
• Why using equity to buy an investment property can be a smart move
• The potential risks
• The main ways to access your equity

What Is Home Equity?

Equity is the difference between the current market value of your property and the amount you still owe on your home loan.

Example:

• Property value: $1,000,000
• Mortgage balance: $200,000
• Total equity: $800,000

However, not all of this is usable equity. Most lenders will let you borrow up to 80% of your property’s value without paying Lenders’ Mortgage Insurance (LMI).

Using the example above:

• 80% of property value = $800,000
• Minus existing loan balance ($200,000)
• Usable equity: $600,000

You may be able to borrow more than 80% if you’re prepared to pay LMI.

Why Use Equity to Buy an Investment Property?

Using the equity in your home to purchase an investment property can be a powerful way to build wealth. Here are the main pros and cons.

Benefits

• No deposit needed – Equity can replace the need to save a large deposit, letting you act quickly on opportunities.
• Possible tax benefits – You may be able to claim deductions for loan interest, property management fees, and maintenance costs.
• Portfolio growth – Holding multiple properties could lead to long-term capital gains and rental income.
• Increased purchasing power – Equity may allow you to borrow more than you could with just your income and savings.

Risks

• Higher debt levels – Borrowing against your equity increases your total repayments.
• Market risk – If property values fall, you could end up in negative equity.
• Tax obligations – Capital gains tax may apply when selling the property. Always check with a tax professional.

Ways to Access Your Equity

There are several ways to use equity to buy an investment property, depending on your financial situation and goals:

1. Refinance Your Home Loan
   Replace your current mortgage with a new one for a higher amount, using the extra funds as your deposit.
2. Home Loan Top-Up
   Increase the limit on your existing home loan to access funds for the investment deposit.
3. Cross-Collateralisation
   Use your home as security for both your existing and new investment loan.

The Bottom Line on Using Equity for Property Investment

Using equity to buy an investment property can be an effective way to grow your property portfolio without needing a cash deposit. However, it’s essential to weigh the benefits against the risks and get professional advice to ensure it’s the right move for you.

Need Help Unlocking Your Equity?

At Connected Finance, we help clients assess their equity position and explore tailored finance options for buying an investment property. You can request a free assessment here or contact our office on (02) 4288 8100. 
We’ll guide you through the process so you can make confident, informed decisions.