If you own a home in Australia and you’ve been paying it down for a few years, you may already have enough for an investment property deposit, without saving anything extra. Using equity to buy investment property is one of the more practical paths available to existing homeowners, and it works more often than people expect.
Equity is the difference between your property’s current market value and what you still owe on your loan. However, total equity and usable equity are two different numbers.
Most Australian lenders lend up to 80% of your property’s value. The gap between that 80% ceiling and your current loan balance is your usable equity, what you can actually borrow against.
For example, a home worth $750,000 with a $400,000 loan has $350,000 in total equity. Usable equity, however, is ($750,000 × 80%) minus $400,000, which is $200,000.
That $200,000 is what you could put toward an investment property deposit.
This formula helps estimate how much usable equity may be available in your current property to help fund an investment property deposit.
Worked example:
Your lender will need a formal property valuation; your own estimate won’t do. The number they land on directly determines how much equity you can access.
Borrowing above 80% of your property’s value triggers Lenders Mortgage Insurance (LMI). This protects the lender, not you, and typically adds $10,000 to $25,000 to your costs. Most investors structure around it by staying at or below 80%
The released equity acts as your deposit on the new purchase. You take out a separate investment loan for the remaining balance.
Instead of saving $130,000 in cash for a 20% deposit on a $650,000 investment property, you access $130,000 from your home’s equity. Your existing home loan increases by that amount. A separate investment loan covers the rest.
One thing worth getting right from the start: keep the loans separate. Mixing your home loan and investment loan into one facility, cross-collateralisation, creates problems later. Selling one property, refinancing, or accessing equity individually becomes harder. Most mortgage brokers advise against it unless your situation specifically warrants it.
Here are the two main options:
You renegotiate your home loan, with your current lender or a new one, increasing the loan amount to release equity as cash. That cash funds your investment deposit.
You increase your existing loan with the same lender. Faster, less paperwork, but you don’t get the chance to negotiate a better rate.
Both achieve the same outcome. Which suits you depends on your current interest rate and how quickly you need to move. A mortgage broker can compare both options across multiple lenders.
A useful starting estimate: multiply your usable equity by four to find a rough target property price.
This works because a 20% deposit plus purchase costs represents about 25% of a property’s value. If your usable equity is $140,000, the rule of four suggests a target of around $560,000.
This is an estimate, not a lending guarantee. Your actual borrowing capacity also depends on income, existing debts, and how a lender assesses serviceability. Some investors exceed this; others fall below it, depending on their financial commitments.
Loan structure affects the tax deductibility of your interest, and getting it wrong from the start is expensive to unwind.
Under ATO guidance, the purpose of the loan matters, not which property secures it. If equity is drawn to buy an income-producing investment, the interest on that loan portion is generally tax-deductible. Mix investment and personal funds in the same loan split, and that deductibility gets complicated.
Keep investment and owner-occupier lending in separate splits. Both your accountant and mortgage broker should be in this conversation before you draw anything down.
Many investors also choose an interest-only investment loan for the early hold period. Because the interest is tax-deductible and principal repayments are not, this structure can improve cash flow. Confirm whether it suits your situation with your accountant.
Equity is only half the picture. Lenders also assess whether you can service both loans, your home loan and the new investment loan, at the same time.
In 2026, Australian lenders apply a serviceability buffer of roughly 3% above the actual loan rate. If your investment rate is 6.5%, the lender tests your capacity to repay at around 9.5%.
Most lenders count 70–80% of expected rental income toward serviceability, not the full rent figure. Factor in loan repayments, property management fees (typically 8–10% of rent), council rates, insurance, maintenance, and vacancy. If the gap between income and costs puts genuine pressure on your monthly budget, it’s worth waiting until your position is stronger.
Interest on an investment loan is generally tax-deductible when the property generates rental income. Building depreciation is claimable over time via a depreciation schedule. Capital gains tax is reduced by 50% for assets held longer than 12 months.
Negative gearing, where costs exceed rental income, offsets your taxable income for the year. For higher-income earners, this is a real financial benefit. However, it shouldn’t be the primary reason to buy a property.
Always confirm the specific tax implications with a registered accountant before drawing equity or structuring a new loan.
Once you know your equity position, the next step is finding a property worth putting it toward. Landmark Property Group QLD connects investors with developer and builder releases across South East Queensland, Logan, Ipswich, Park Ridge, Greenbank, before they go public.
We also connect clients with licensed mortgage brokers who assess their equity position and structure loans correctly. We are a property advisory and referral service, not a real estate agency. No pressure, no commissions, no sales pitch.
Once you understand equity leverage, the next step is choosing which strategy to apply it to. Read our full resource on property investment strategies.
Most lenders require a 20% deposit to avoid LMI. On a $650,000 investment property, that’s $130,000 in usable equity plus about $20,000 for purchase costs. Use the formula (property value × 80%) minus your existing loan to see what you currently have.
Yes, if your existing property has enough usable equity. The equity release funds the deposit entirely. You still need to demonstrate you can service both loans from your income.
Cross-collateralisation is when a lender uses both properties as security for the same loan. Most experienced investors avoid it because it reduces flexibility when selling, refinancing, or accessing equity from each property separately. Keep loans in separate splits where possible.
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