How to Use Your Home Equity to Buy an Investment Property

Equity is the difference between what your property is worth and what you owe on it. If your home is worth $900,000 and your loan balance is $550,000, you have $350,000 in equity.

But not all of that equity is accessible. Lenders typically allow you to borrow against your property up to 80% of its value (without paying LMI). The portion above your current loan balance and up to 80% of the property value is called your usable equity.

There are two main ways to access your equity for an investment property purchase:

The right structure depends on your goals, tax position, and lender. We'll recommend the most appropriate approach for your situation.

Your usable equity determines your deposit. But you also need to qualify for the investment loan based on your income and expenses - including the rental income from the investment property.

Note: you'll still need to fund stamp duty and other purchase costs (typically 3–5% of purchase price) from savings or additional equity. We'll calculate the full cost of your investment purchase upfront.

Using equity to invest is a powerful strategy - but it's not without risk. Here's what you need to understand before proceeding:

Using equity to invest is one of the most effective wealth-building strategies available to Australian homeowners. But it needs to be done thoughtfully, with the right loan structure and a clear understanding of your risk tolerance.

In a strategy call, we'll:

• ✓Calculate your exact usable equity based on a current property valuation
• ✓Model your borrowing capacity for an investment loan
• ✓Recommend the most tax-efficient loan structure (in coordination with your accountant)
• ✓Stress-test your repayments at higher interest rates
• ✓Identify the best lenders for investment lending in your situation