One of the most common paths into property investing in Australia is through equity in an existing home. If you've owned your home for a few years and property values have risen, you may have more usable capital than you think, and it's possible to use it as the deposit for an investment property without saving a separate cash deposit from scratch. Here's how the process works.
What Is Usable Equity?
Equity is the difference between what your home is worth and what you owe on it. Usable equity is the portion of that equity that a lender will allow you to access, which is typically up to 80% of the property's current value minus your outstanding loan balance.
The formula: (Current property value x 0.80) minus outstanding loan balance = usable equity
For example: if your home is worth $1,000,000 and your loan balance is $550,000, your usable equity is $250,000. That $250,000 could potentially serve as the deposit and purchase costs for an investment property.
How Much Can You Buy?
As a general rule of thumb, multiply your usable equity by four to estimate the maximum purchase price for an investment property. That's because lenders typically require at least a 20% deposit for investment purchases to avoid LMI, and your equity covers that 20%.
Using the example above: $250,000 in usable equity could support the purchase of an investment property up to around $1,000,000 (with a 20% deposit of $200,000 and the remainder for purchase costs).
In practice, your actual purchasing power also depends on your ability to service both loans from your income. Equity gives you the deposit. Serviceability determines whether you can carry both mortgages.
How to Access the Equity
There are two main approaches. The first is a loan top-up with your existing lender, where you increase your current mortgage to release the equity as cash. This cash then becomes the deposit for the investment property, alongside a new loan for the remaining purchase price.
The second is to refinance your existing home loan to a new lender at a higher balance, releasing the equity in the process. This can be beneficial if the new lender also offers a more competitive rate on your home loan, though it involves more paperwork and a longer settlement timeline.
Loan Structure Matters for Investors
How you structure your loans has tax implications that are worth understanding before you proceed. Generally, debt linked to an investment property (where interest is tax-deductible) should be kept separate from debt linked to your owner-occupied home (where interest is not deductible).
Getting the structure right from the start saves complications down the track. A broker who works regularly with investors can advise on structuring before you commit to anything.
What Lenders Look At
When assessing an equity release for investment purposes, lenders look at the combined servicing across both loans. They also apply stricter assessment buffers for investment purchases. Rental income from the investment property is factored in, but typically at a discount, usually 70% to 80% of the expected rent, to allow for vacancies and property management costs.
The February 2026 rate hike and the APRA debt-to-income limits introduced in the same month have also made lenders more cautious about highly leveraged investment borrowing. It's worth getting a clear borrowing assessment before you identify a property and get attached to it.
Ready to Find Out What You Could Do?
At Swish, we work with homeowners who are looking to use their equity to start or grow a property portfolio. We assess your current equity position, calculate your combined borrowing capacity, advise on loan structure, and help you find the right investment loan from our lender panel.
If you're curious whether your equity position could support an investment property, book a free call with Swish and we'll work through the numbers with you.