Saving a deposit for another property can feel like an uphill battle, especially with property prices and everyday costs on the rise. But if you already own a home or investment property, you may have another way forward: using your existing equity.

Many clients come to us thinking they’re years away from buying again, only to discover they already have the funds they need. In this article, we explain what equity is, how it works and how our finance brokers help clients use it safely and strategically to invest sooner.

What Equity Is and How Does It Work?

Equity is the difference between your property’s market value and the amount you still owe on your loan.

For example, if your property is valued at $800,000 and your remaining loan balance is $480,000, you have $320,000 in equity.

Not all equity is available to use. Lenders typically allow you to borrow up to 80% of your property’s value without paying Lenders Mortgage Insurance (LMI). In this example:

  • 80% of $800,000 = $640,000
  • Subtract the $480,000 you still owe = $160,000 usable equity

In many cases, usable equity can form part of the deposit for an investment property, depending on your circumstances and lender requirements.

How Much Equity Do You Need to Buy an Investment Property?

The amount depends on the purchase price of the property and your lender’s policies. Lenders often require around 20% of the purchase price as a deposit, plus purchase costs such as stamp duty, legal fees and inspections.

If you want to buy a $550,000 investment property, you’d generally need $110,000 for the deposit and an additional amount for costs, all of which could potentially come from your usable equity.

How to Use Home Equity for Your Next Purchase

For many people, this process feels complicated or risky, especially if they’ve only heard snippets of advice from friends, family or online forums. Our finance brokers explain the process clearly and help clients understand what’s possible for their situation.

Here’s how our brokers typically guide the process:

1. Confirm your usable equity

We arrange a formal valuation through the lender so we’re working with accurate numbers, not online estimates.

2. Review your borrowing capacity

We run serviceability checks and stress-test repayments to make sure you can comfortably manage the new loan, even if interest rates rise or rental income changes.

3. Structure your loans properly

We keep your home loan (non-tax deductible) separate from your investment loan (potentially tax deductible) so your finances are clear and tax-smart.

Some lenders may use a setup called cross-collateralisation, where two or more properties are tied to the same loan. While this is a common structure, it can sometimes reduce flexibility. For instance, if you decide to sell or refinance one property, the bank may reassess all loans linked to it, which can affect how and when you access equity. Keeping loans separate often provides more clarity and control as your property portfolio grows.

4. Coordinate with your accountant

We ensure the way funds are drawn and used is tax-efficient and fits your bigger picture.

Risks and Considerations When Using Equity to Invest

Unlocking equity isn’t just a financial calculation; it’s a strategic decision. The right approach can:

  • Help you grow your portfolio without tying up business cash flow.
  • Allow you to buy sooner in a rising market rather than waiting years to save.
  • Enable you to diversify into different property types or locations.

However, there are risks to manage, including:

  • Over-leveraging: Borrowing too much can cause financial strain.
  • Market fluctuations: Property values can go down as well as up.
  • Cash flow pressure: Vacancies, maintenance costs, and rate rises can impact returns.

When working with clients, our finance brokers highlight potential safeguards, such as leaving buffers to reduce risk and ensuring repayments remain manageable.

Alternative Strategies If Equity Isn’t Right Now

If you don’t have enough usable equity or your borrowing capacity is limited, our Finance & Lending team can talk you through what may be possible, including:

  • Build equity faster through extra repayments or renovations.
  • Restructure existing loans to improve serviceability.
  • Plan for a staged approach, focusing on building your position over 6–12 months before investing.

Why Work With a Finance Broker When Using Equity?

  • Complex issues explained: We cut through jargon so you know exactly what’s happening at each step.
  • Tailored strategies: Your circumstances, business and personal goals are unique, so your plan should be too.
  • Peace of mind: We look ahead to protect your future borrowing options and guard against overextending.
  • Brokers who care: We’re genuinely invested in seeing our clients succeed and make confident, informed decisions.

With the right advice, equity in your current property can open doors to your next investment without compromising financial stability.

If you’d like to know whether equity could work for you, Carbon’s Finance & Lending team can walk you through your options in plain language, design a strategy tailored to your goals and give you the confidence to take your next step.

Contact us