Quick answer: usable equity is roughly 80% of your home’s value minus what you owe. It can cover the deposit and costs on an investment property, so you may not need cash savings. You still need the income to afford the total borrowing, and the way the loans are set up matters as much as the amount.
For many owners, the equity built up in their home is the biggest barrier-remover for a first investment property. Used well, it means buying without years of extra saving. Used badly, it ties your home to an investment in ways that are hard to undo.
How much equity can you use?
Lenders generally lend up to 80% of a property’s value without lenders mortgage insurance (LMI). So:
- Home valued at $1,200,000 × 80% = $960,000
- Less your current loan of $500,000
- = about $460,000 of usable equity
The lender uses its own valuation, not the agent’s estimate, so plan with a conservative figure, especially while prices are falling.
A worked example
Using that home to buy a $750,000 investment property in NSW:
| Item | Amount |
|---|---|
| 20% deposit | $150,000 |
| NSW stamp duty (2026–27) | ~$27,937 |
| Legal, inspections and other costs (estimate) | ~$3,000 |
| Funded from equity (loan against your home) | ~$181,000 |
| New investment loan (80% of the price) | $600,000 |
That leaves plenty of equity unused, but it doesn’t mean you can borrow it all. The lender checks whether your income covers the repayments on the existing loan, the equity loan and the new investment loan together, assessed at their rate plus a buffer of around 3%. Our buying costs calculator and borrowing power calculator give a first estimate.
Set the loans up the right way
- Use a separate loan split for the deposit. Borrow the deposit and costs as their own split against your home, rather than adding them to your home loan. That keeps the investment borrowing clearly separate, which makes life easier for you and your accountant.
- Avoid cross-securing where you can. Cross-securing means both properties secure the same loans. It can make selling one property, refinancing or switching lenders harder, because the lender has a say over both. Keeping each property as stand-alone security is usually more flexible.
- Interest-only or principal and interest? Some investors choose interest-only on the investment loan to keep repayments down for a period. It costs more in total interest. Our IO vs P&I calculator shows the difference.
- Think about the next purchase. Which lender you use first can affect how much you can borrow next time. We plan the order with that in mind.
Check the tax position first
Tax rules for investors changed this year. Negative gearing on established residential property bought after 12 May 2026 is restricted, with the changes to rental losses and the capital gains tax discount applying from 1 July 2027, and new builds are treated differently. That can change whether an established home or a new build suits your plans. Our guides on the 2027 changes and new builds explain the detail. We arrange the lending, not tax advice, so check your position with your accountant before you buy.
Common questions
How much equity can I use?
Lenders usually let you borrow up to 80% of your home’s value without lenders mortgage insurance. Usable equity is roughly 80% of the value minus what you owe. For a $1.2 million home with a $500,000 loan, that’s about $460,000.
Do I need a deposit if I use equity?
Equity can replace a cash deposit, covering the deposit and purchase costs such as stamp duty. You still need to show you can afford the repayments on the total borrowing.
Should I cross-secure my properties?
Usually it’s better to keep each property as separate security, with a separate loan split for the deposit. Cross-securing ties the properties together, which can make selling, refinancing or switching lenders harder later.
Is the interest on an equity loan tax-deductible?
Deductibility generally depends on what the borrowed money is used for, not what secures it. Recent changes also affect negative gearing on established properties bought after 12 May 2026. Check your position with your accountant before you buy.
How does the bank work out my home’s value?
The lender orders its own valuation, which can differ from what you or an agent expect. In a falling market, valuations can come in lower, so plan with a conservative figure.
General information only, not financial, tax or credit advice. Example figures are estimates; stamp duty uses the NSW 2026–27 schedule. Lender valuations, policies and assessment rates vary.
