How to Use Home Equity to Buy Investment Properties in Australia
Discover how to use the equity in your current home to buy additional investment properties in Australia without a large cash deposit, with this 2026 guide covering usable equity calculations, the 80% LVR rule, refinancing steps, the popular 'rule of four' strategy, tax benefits like negative gearing, pros and cons, and common myths to avoid.
Unlocking Home Equity: How to Use It to Invest in Additional Properties in Australia
Discover the power of home equity in Australia and how it can help you build a property portfolio. By leveraging the equity in your current home, you can access funds to purchase investment properties without needing a large cash deposit. At Mortgages Plus, we specialise in guiding Australian homeowners through competitive home equity loan options, refinancing, and strategies tailored to maximise your investment potential in 2026.
What Is Home Equity in Australia?
Home equity is the difference between your property's current market value and the outstanding balance on your mortgage. For example, if your home is valued at $800,000 and you owe $400,000, you have $400,000 in home equity.
This equity builds over time through:
- Regular mortgage repayments that reduce your loan principal.
- Property value appreciation due to market growth.
In Australia, usable equity is typically limited to around 80% of your home's value (minus what you owe) to maintain a safe loan-to-value ratio (LVR). Lenders often cap borrowing at this level to avoid Lender's Mortgage Insurance (LMI) in most cases.
The Importance of Home Equity for Property Investors
Home equity serves as a powerful wealth-building tool in Australia's property market. It provides access to low-cost borrowing compared to unsecured loans, enabling you to invest in additional properties that can generate rental income and capital growth.
Many successful Australian investors use home equity to fund deposits on investment properties, benefiting from:
- Potential tax deductions on interest (subject to ATO rules and negative gearing).
- Rental income covering loan repayments.
- Long-term portfolio growth as properties appreciate.
With property prices forecast to rise modestly in 2026 (around 4-6% across capital cities according to major banks), tapping into home equity now can position you for future gains. At Mortgages Plus, our experts help you navigate these opportunities with personalised advice.
How to Use Home Equity to Buy Investment Properties
The most common way Australians access home equity for investing is through refinancing or topping up your existing home loan. Here is how it typically works:
- Calculate Your Usable Equity Get a professional valuation (lenders use their own). Subtract your mortgage balance and apply the 80% LVR rule.Example: Home value $800,000 → 80% = $640,000. If you owe $400,000, usable equity ≈ $240,000.
- Refinance or Top Up Your Loan Increase your current mortgage to release cash as a lump sum. This cash becomes your deposit for the new investment property.
- Secure the Investment Loan Use the released funds as a deposit (often 20% to avoid LMI) and take out a separate loan for the investment property.
A popular "rule of four" suggests multiplying your usable equity by four to estimate your maximum investment property purchase price (e.g., $240,000 usable equity → up to ~$960,000 property).
This strategy allows you to buy without selling your current home, preserving your primary residence while growing your portfolio. Many investors structure loans separately for flexibility and tax benefits.
Key Scenarios: When to Leverage Home Equity for Investments
Using home equity shines in these investor-focused situations:
- Building a Portfolio Start with one investment property, then repeat as equity grows in multiple properties.
- Capitalising on Market Opportunities Enter growing areas with strong rental demand.
- Negative Gearing Benefits Deduct interest and expenses against your income (consult a tax advisor).
Always ensure rental income and your finances can service the additional debt. In 2026, with variable rates starting from around 4.99% for investment loans, conditions remain favourable for strategic borrowing.
Pros and Cons of Using Home Equity to Invest in Properties
Pros:
- Access large sums without cash savings.
- Lower interest rates than personal loans.
- Potential tax advantages through negative gearing.
- Build wealth via multiple appreciating assets and rental income.
Cons:
- Increases overall debt and repayments. Risk if property values fall or rates rise.
- Your home is security; defaulting risks foreclosure.
- Potential LMI if borrowing over 80% LVR.
- Market risks. Property prices may not grow as expected.
Weigh these carefully. Mortgages Plus provides transparent comparisons to help you decide if this fits your goals.
Common Misconceptions About Using Home Equity in Australia
Myth 1: You can access 100% of your equity. Reality: Lenders limit to ~80% usable equity for safety.
Myth 2: It is "free money" for investing. Reality: You are borrowing against your home. Repay with interest, and manage risks.
Myth 3: Anyone can do it easily. Reality: Requires strong income, credit, and serviceability; professional advice is essential.
Conclusion: Grow Your Property Portfolio with Mortgages Plus
In 2026, home equity remains a cornerstone for Australian property investors seeking to acquire additional properties amid steady market growth. Strategic use through refinancing or loan top-ups can accelerate wealth building, but it requires careful planning.
Ready to explore using home equity to invest in more properties? Mortgages Plus offers expert advice, competitive rates, and tailored solutions for home equity loans and investment financing. Contact us today for a free, no-obligation consultation. Let us turn your equity into a thriving investment portfolio!
