Equity and usable equity are different

If a property is worth $1,000,000 and the loan is $600,000, the total equity is $400,000. A lender may allow borrowing up to a set percentage of the property value, often 80% before lenders mortgage insurance. At 80%, the accessible amount in this example could be $200,000 before costs and policy limits.

Equity can fund the deposit, not the whole purchase

A common structure uses released equity from an existing property for the deposit and costs, with a separate loan secured by the investment property for the balance. Keeping borrowing purposes distinct can make the structure clearer. Ask an accountant for tax advice before changing loan arrangements.

Serviceability is still essential

Access to equity does not guarantee approval. The lender assesses your ability to repay the combined loans using your income, expenses, existing liabilities and a portion of expected rent. Higher interest rates, property expenses and vacancy periods all deserve a conservative cash-flow plan.

Understand the downside

Using your home as security increases your exposure if an investment performs poorly or values fall. Avoid treating a bank valuation as a sale guarantee, retain cash reserves and consider the impact of rate rises. Advice from lending, tax and legal professionals can help you make an informed decision.