Buy Your Next Investment Property Without a Cash Deposit

If you’ve been watching the property market and wondering how to take your next step as a property investor, the answer might already be sitting in your home — in the form of equity.

With rising property values across Australia and lenders offering competitive home loan products, more Australians are discovering they can buy an investment property using equity in their existing property.

In this comprehensive guide, we’ll explain what equity is, how much you can access, and the steps to using equity to buy an investment property — all while covering key financial considerations like loan repayments, tax implications, and risk management.

What is Equity in your Home?

Equity in your home refers to the difference between your home’s current market value and the outstanding mortgage you still owe.

For example:

• If your property’s current market value is $900,000
• And your current home loan balance is $450,000
• Then your equity is $450,000

However, this doesn’t mean you can access all $450,000. Lenders generally only allow you to access up to 80% of the property’s value without Lenders Mortgage Insurance (LMI). That’s called your usable equity or useable equity.

How to Calculate How Much Equity you Can Use

Let’s use that same example:

• Property Value: $900,000
• Loan Balance: $450,000
• 80% of $900,000 = $720,000
• Usable Equity = $720,000 – $450,000 = $270,000

That $270,000 is how much equity you can use to purchase another property.

Many investors use this as a deposit and then take out a separate loan (called an investment loan) secured against the new property.

Why Use Equity to Buy an Investment Property?

Using equity to buy an investment property offers significant benefits:

• No need for cash deposit — equity in your current property acts as security
• Accelerate your investment strategy — build your property portfolio faster
• Access tax deductions — interest on your investment loan is generally tax deductible
• Keep your existing home — no need to sell your current property
• Leverage growth — using equity allows you to benefit from multiple properties increasing in value

Steps to Using Equity to Buy Property

Here’s how property investors can access their equity and make it work:

1. Get Your Property Valued

Ask your lender or mortgage broker to arrange a formal valuation to assess your property’s current market value.

2. Calculate How Much Equity You Can Use

Determine your loan balance and work out your usable equity. You can use our equity calculator or speak with an adviser to find out how much equity you have.

3. Refinance or Apply for a Supplementary Loan

Depending on your needs, you might refinance your existing home loan or apply for a supplementary loan account. This might involve increasing your loan amount or creating a new loan secured by the equity in your home.

4. Apply for an Investment Loan

Use the equity as a deposit, and take out an interest-only loan or a principal and interest repayment structure on your new investment loan. Choose between fixed and variable interest rates based on your financial goals.

5. Purchase the Investment Property

Once approved, you can confidently purchase your investment property, negotiate better terms, and add to your growing investment portfolio.

Loan Structures and Financial Considerations

Before using your home equity to buy an investment property, it’s essential to understand the different loan structures available and how they’ll impact your cash flow, borrowing power, and long-term financial outcomes.

Budgeting for Loan Repayments

When purchasing an investment property, one of the first steps is to ensure your loan repayments are manageable within your current and future budget.

This includes planning for:

• Repayments on your existing home loan
• New repayments on your investment loan
• Other financial commitments like credit cards, car loans, or business expenses

A best practice is to stress-test your repayments using a hypothetical interest rate 2–3% higher than today’s — giving you peace of mind if rates rise unexpectedly.

Choosing Between a Separate Loan or One Combined Loan

You have two options when structuring the finance:

• Separate loan: Often used when borrowing against equity to fund a deposit. A separate loan keeps the new debt distinct, making it easier to track and potentially more tax effective.
• One loan: Some investors choose to refinance their entire debt into one loan, secured by both the existing property and the new investment. This may simplify repayments, but can blur the lines between deductible and non-deductible interest.

Your decision should reflect your investment strategy and be guided by your mortgage broker or financial adviser.

Interest-Only vs Principal and Interest Repayments

When structuring your investment loan, you’ll usually choose between:

• Interest-only loans: Lower monthly repayments and maximised tax deductions. These are ideal for investors focused on cash flow or rental income returns in the early years.
• Principal and interest repayments: These gradually reduce your loan balance over time, helping to build equity and reduce long-term interest costs.

Each approach suits different investor profiles, so it’s crucial to align the structure with your financial goals and risk tolerance. Always seek tax advice from a registered tax agent or financial adviser to ensure compliance with taxation law and to optimise your deductions.

Case Study: Using Equity to Invest in Property

Liam and Grace own a current property valued at $1.1 million, with a loan balance of $500,000. After a valuation, their usable equity was $380,000. Working with a mortgage broker, they used $300,000 of that equity as a deposit and secured a $600,000 investment loan to purchase a $900,000 unit in Brisbane.

Because the rental income covers a significant portion of their loan repayments, they’ve grown their property portfolio while preserving their financial buffer.

Key Risks and How to Manage Them

Using equity is a powerful wealth-building tool — but it comes with responsibilities:

• Rental income may fluctuate, especially in uncertain markets
• A higher loan amount may stretch your financial commitments
• Rising interest rates can impact your interest repayments
• Government fees, legal costs, and property prices may change over time

That’s why it’s crucial to get credit approval based on your full financial situation, not just your equity position.

Causbrooks Finance: Helping You Use Equity to Buy Property

At Causbrooks Finance, we help you:

• Understand your financial situation
• Determine your maximum loan amount
• Match you with lenders based on your investment strategy
• Optimise your structure for tax deductions

We hold an Australian Credit Licence and work closely with your financial adviser or accountant to ensure your structure is robust and future-proof.

Let’s Turn your Equity into Opportunity

You don’t need to sell. You don’t need to wait. You might already have what you need to grow your wealth.

Book a Free Strategy Call Today

Let’s help you unlock the equity in your home and purchase your next investment property with confidence.