To use equity to buy an investment property, you borrow against the equity in your current home and use it as the deposit, instead of saving cash. Lenders usually let you borrow up to 80% of your home's value, less what you owe, and that amount is your usable equity. Your income still has to support both loans.
Equity can speed up a second purchase, but how it is accessed and secured shapes the risk for years. Liviti's finance team is an MFAA-accredited brokerage comparing more than 70 lenders, and works alongside Liviti's strategy and buyer's agency teams.
Key takeaways
- Equity is your home's market value minus what you still owe on the loan.
- Usable equity is generally up to 80% of the home's value, less the loan; borrowing above 80% usually brings lenders mortgage insurance.
- Equity usually funds the deposit; stamp duty and other purchase costs need cash or more equity on top.
- Lenders assess your income, debts and living costs across both loans, not just the equity.
- Standalone loans keep each property separate; cross-collateralised loans tie them to one lender.
What equity and usable equity mean
Equity is the difference between your home's market value and the amount you still owe on it. A home worth $1,000,000 with a $500,000 loan has $500,000 of equity.
Usable equity is the part a lender will let you borrow against. NAB and CommBank both describe it as generally up to 80% of the home's value, minus the current loan:
- 80% of $1,000,000 is $800,000
- $800,000 minus the $500,000 loan leaves $300,000 of usable equity
Borrowing above 80% of the value is possible with some lenders, but usually means paying lenders mortgage insurance. The lender confirms the figure with its own valuation, which can differ from what you expect the home to be worth.
How much property your equity can buy
Usable equity typically covers the deposit, and purchase costs come on top. The example below is illustrative only and assumes purchase costs of 5% of the price.
- Usable equity: $300,000
- A 20% deposit plus 5% purchase costs is 25% of the price
- $300,000 covers that on a property up to $1,200,000, with a loan of $960,000 for the rest
Whether a lender approves the $960,000 depends on your income, existing debts and living costs, not the equity. Purchase costs vary by state; Liviti's property buying cost calculator gives the figure for a specific purchase.
Four ways to access your equity
- Top up your home loan. Increase the existing loan and draw out the extra as cash for the deposit.
- Refinance with a separate split. Move to a new loan, with your current lender or another, and set up a separate split for the investment deposit.
- A supplementary loan account. A new loan account secured by your home, kept apart from the original mortgage, which can have its own rate and repayment type.
- Cross-collateralisation. The lender takes both your home and the new property as security for the combined loans. It can be simpler to set up, but it ties both properties to one lender, and Westpac notes it may give you less flexibility, since separating the two securities later takes more work.
A separate split or a supplementary account keeps the investment borrowing in its own loan, which makes it easier to track; a top-up mixes it into the home loan. A broker can show how each structure looks for your loans and lender.
What lenders look at besides equity
- Income and serviceability: whether your income covers both loans and your living costs. For an investment property, lenders may count part of the expected rent.
- Existing debts: credit cards, car loans and other commitments reduce what you can borrow.
- The valuation: the lender's valuation of your home sets the usable equity.
- The new property: its value, location and type affect what the lender will lend against it.
Costs to plan for beyond the deposit
Equity usually covers the deposit, but a purchase also brings stamp duty, conveyancing, building and pest inspections, lender fees and settlement adjustments. After settlement come the holding costs: rates, insurance, strata fees, property management and maintenance.
A cash reserve matters as much as the equity. CommBank's guidance is to invest only if you can cover both loan repayments for a period without rent, such as between tenants.
The risks of using equity
- More debt on your home. Drawing equity increases the loan secured by the place you live.
- Falling values. If prices fall, the equity buffer shrinks and refinancing gets harder.
- Rate rises. Higher rates raise repayments on both loans at once.
- Vacancy. Weeks without rent fall on your cash flow.
- Tax rules. From 1 July 2027, full deductibility of rental losses is generally limited to eligible new dwellings, with properties held at 7:30pm AEST on 12 May 2026 grandfathered. See property investment strategies in Australia for what that changes, and speak to a registered tax agent about how deductions apply to you.
Using equity and cash together
Some investors have cash as well as equity. Combining the two can fund a larger purchase, cover purchase costs or leave a bigger buffer. See how to invest $200K in property in Australia for how cash works as a deposit and when one property or two makes sense.
Structuring your equity for the next purchase
How equity is accessed and secured decides how easy it is to sell, refinance or buy again later. Liviti's finance team is an MFAA-accredited brokerage comparing more than 70 lenders, and works alongside Liviti's strategy and buyer's agency teams so the loan, the property and the plan line up. Talk to Liviti's finance team, or model the numbers with the Liviti calculators.
Frequently asked questions
How much equity do I need to buy an investment property?
Enough usable equity to cover the deposit and purchase costs. With a 20% deposit and costs of about 5%, that is roughly 25% of the purchase price, so a $600,000 property needs about $150,000. A smaller deposit is possible but usually brings lenders mortgage insurance, and your income still has to support both loans.
How is usable equity calculated?
Take 80% of your home's value, then subtract what you owe. A home worth $1,000,000 with a $500,000 loan has $300,000 of usable equity, because 80% of the value is $800,000. Lenders confirm the value with their own valuation, so the final figure can be higher or lower than your estimate.
Can I use equity to buy a second property without selling?
Yes. Using equity lets you keep your home and borrow against it for the next deposit, through a top-up, a refinance with a separate split or a supplementary loan account. The lender assesses whether your income covers both loans and your living costs, and both loans stay in place after the purchase.
Is cross-collateralisation a good way to use equity?
It is one option. The lender takes both properties as security, which can be simpler to set up, but it ties them to one lender. Westpac notes this may give you less flexibility than other ways of using equity, because separating the two securities later takes more work. Keeping the investment loan separate avoids that.
