Using equity to invest in a second property: an Australian road map

Using equity to invest in a second property in Australia

For many Australian owners, the first place they look for funds to grow a portfolio sits under their roof. Using equity to invest in a second property can free up a deposit without forcing you to save from scratch, letting you chase growth while still enjoying your current home.

What is usable equity?

Equity is the gap between what your home is worth and what you still owe. Lenders usually allow borrowing against up to 80% of the current value, keeping a safety buffer so you avoid extra mortgage insurance. The sum you can pull out after that buffer is your usable equity.

How to work it out

• Get a current valuation from your bank or an independent valuer.
• Multiply the value by 0.8 to find the lending ceiling.
• Subtract your outstanding loan balance. The amount left is the equity you may access.

Funding options

You can request a top up on the existing loan or set up a separate facility linked to the equity. A separate facility keeps investment costs isolated which can make tax time easier.

Best ways to leverage equity for a second home

• Use equity as the full deposit so your savings stay in an offset account and continue to cut interest on the first loan.
• Consider interest only repayments on the investment loan to boost short term cash flow.
• Check rental demand in the suburb to support repayments once tenants move in.

Case study: Sarah and Leo in Sydney

Sarah and Leo bought in Glebe for 900000 five years ago with a 720000 loan. A new valuation places the home at 1.2 million. Eighty per cent of that value is 960000. Their loan balance sits at 650000, giving them 310000 of usable equity. They draw 250000, cover a 20% deposit on a coastal townhouse and keep 60000 for closing costs and a paint refresh.

Step by step on investing in a second property with home equity Australia

1. Order a valuation and confirm your borrowing capacity.
2. Seek pre approval and compare loan structures.
3. Research growth corridors and yield trends.
4. Run cash flow models under different interest scenarios.
5. Settle, then review both loans annually to stay on track.

Speaking with a qualified mortgage broker early can reveal lender policies that fit your strategy.

Frequently Asked Questions

How do I use home equity for property investment in Australia?

You release equity through a top up or separate loan, then apply those funds as the deposit and costs on the new purchase. Provided the combined repayments fit your budget, the bank will treat the equity funds as genuine cash.

Can I use equity from my primary residence for an investment property?

Yes, most lenders allow this as long as the total loan to value ratio on your home stays at or below 80% or you agree to pay lender mortgage insurance. Solid income and clear credit history remain essential.

Ready to turn built up equity into a second key? Contact the Impero team and start planning today.