Equity can be a valuable financial resource you may be able to use to fund the deposit on an investment property.
Your home equity is the difference between your property’s current market value and the remaining balance on your mortgage. For example, if your home is worth $800,000 and you owe $500,000 on your mortgage, your equity is $300,000.
How do I access equity in my home?
To access equity, you usually refinance or apply for an additional loan with your current lender. However, not all your equity is accessible.
Lenders generally allow borrowing up to 80% of the property’s value minus what you still owe. Using the example above, this means you could potentially access $140,000 in usable equity:
$800,000 × 80% = $640,000, minus $500,000 owed = $140,000.
Benefits of using equity for property investment
- No need to save cash for a deposit — equity can be used instead.
- Opportunity to build wealth over time through capital growth and rental income.
- Leverage your existing asset to invest without dipping into personal savings.
- Possible tax advantages — interest on investment loans may be deductible (check with a tax professional).
Risks of drawing on equity
- Increased overall debt that requires careful management.
- Higher mortgage repayments due to a larger loan.
- Market changes — if property values drop, equity may reduce or become negative.
- Lender limits on how much equity you can borrow against.
Ways to borrow against your equity
- Line of credit: Offers flexibility to draw funds as needed, useful for ongoing expenses but requires discipline to manage borrowing.
- Lump-sum loan: A single increase in your mortgage, ideal for property purchases or major renovations, providing predictable repayments but needs careful planning.
Steps to use equity for an investment property
Start by consulting a mortgage broker who can assess how much equity you can access and explain your borrowing options. If you choose to proceed, your broker will assist with obtaining pre-approval.
Once approved, you can search for the right investment property and complete the purchase, similar to a standard home loan process.
If you’re interested in using equity to help purchase an investment property, contact Mortgage Suite Baldivis for personalised advice and support.
