Equity is the difference between what your property is worth and what you still owe on it. Some lenders let you borrow against part of it to fund the deposit and costs on another property, and the lender decides how much.
For many people, the first property is the hardest. Equity is often how the second one happens. Here is how it works.
What equity is
If your home is valued at a certain amount and your loan is smaller, the gap is your equity. It grows when your property's value rises and when you pay down the loan. It shrinks if values fall.
Usable equity is smaller than total equity
Lenders usually lend only up to a set share of a property's value, often 80% without lenders mortgage insurance. Your usable equity is roughly that share of the value, minus what you owe. The exact figure depends on the lender's own valuation, not an online estimate.
Equity is still borrowed money
Using equity means increasing a loan. You pay interest on it, and your repayments go up. That is why your borrowing capacity matters as much as your equity: the lender checks that you can afford the total repayments on both properties. We explain how that is assessed in Borrowing capacity for an investment property.
How the process usually runs
- Get a current valuation through your lender or broker.
- Work out the usable equity and how much you want to use.
- Check your borrowing capacity for the total loans.
- Set the structure with your broker, often a separate loan split for the investment.
- Use the funds for the deposit and up-front costs on the next property.
A mortgage broker can compare how different lenders treat the same equity. The difference between lenders can be large.
Under the 2027 rules
From 1 July 2027, the tax treatment of your next property depends on whether it is a new build or established. A new build keeps negative gearing. An established property bought after 7:30pm AEST on 12 May 2026 can only offset its losses against residential property income. See Negative gearing changes from 1 July 2027 and ask your accountant how this affects your plan.
What changed for property investors in 2026.Get the free guide
Baldivis, WA
Common questions
How much equity can I use?
The lender decides, based on its valuation, your loans and your borrowing capacity. A broker can compare lenders.
Can I use equity in my home to buy an investment property?
Many people do. Talk to your accountant about how the loan is set up, because it can affect what is deductible.
Do I need lenders mortgage insurance?
It depends on how much you borrow against the property's value. Many lenders charge it above 80%.
What if my property's value falls?
Your equity shrinks, but your loan stays the same. That is one reason to keep a buffer rather than using every dollar available.
General information only. It does not take your personal circumstances into account. Speak with a licensed mortgage broker and your accountant about your circumstances.
