Using Equity as a Deposit
Can I use the equity in my home as a deposit for an investment property?
By Andrew, franklenn FINANCE 7 min readUpdated 3 November 2026
The short answer
Yes, you can use the equity in your home as a deposit for an investment property, instead of saving cash. The lender releases part of your usable equity, usually up to 80% of your home's value, as a separate loan that covers the deposit and purchase costs such as stamp duty. A second loan, secured by the new property, covers the rest. You'll still need to show you can afford the combined repayments, and the way the loans are set up matters for flexibility and tax.
Detailed explanation
How it works
Instead of handing over cash for a deposit, you borrow against the equity you've built in your existing property. The lender sets up an equity release loan, sometimes called a top-up or a separate split, against your home. That money pays the deposit and costs on the new purchase. The rest of the purchase price is funded by a new loan secured by the investment property itself.
The end result is that you may buy an investment property with little or no cash of your own, but you are borrowing the full purchase price plus costs. That is a bigger debt, and it should be treated with respect.
What the equity needs to cover
People often focus on the 20% deposit and forget the rest. A purchase also comes with stamp duty (transfer duty), legal or conveyancing fees, building and pest inspections, and lender fees. On an investment property, stamp duty can be a large number, and first home concessions won't apply. Check the current duty for your state using our stamp duty calculator.
- Deposit, usually 20% of the price to avoid LMI on the investment loan.
- Stamp duty, which varies by state and price.
- Conveyancing, inspections and loan fees.
- A cash or equity buffer for vacancies, repairs and rate rises.
Structure: keep the loans separate
How you set up the loans is just as important as whether you can get them. Our general preference is to keep the equity release as its own loan split, used only for the investment purchase, and to have the investment property secure its own loan. That keeps each property standing on its own feet.
Keeping the investment borrowing separate from your home loan makes it easier to track the interest on money used for investment purposes, which is generally what matters for tax deductibility. It also avoids tying both properties together under one security arrangement, known as cross-collateralisation, which can reduce flexibility later. Your accountant should confirm the tax treatment for your situation.
Serviceability still decides the outcome
The lender will assess whether your income, plus a portion of the expected rent, can cover all of your debts at an assessment rate that is higher than the actual rate. Many lenders only count part of the rent to allow for vacancies and costs. If serviceability is tight, a different lender, a different loan term or an interest-only period might change the picture, but each of those choices has trade-offs.
Is it right for you?
Using equity can be a sensible way to start or grow a portfolio, and it is a strategy we understand from our own investing. It works best when you have stable income, a solid buffer and a property chosen on research rather than hype. It suits people less well if their job is uncertain, they are already stretched, or they would be relying on rapid growth to make the numbers work.
Before committing, it's worth stress-testing the plan. Ask yourself how you would cope if the property sat vacant for six weeks, if a hot water system failed, or if rates rose by another percentage point. If those scenarios would cause real strain, it may be better to wait, buy at a lower price point or build a bigger buffer first.
Worked example
Buying a $685,000 investment property using home equity
An illustrative example. A homeowner's property is valued at $940,000 with $388,500 owing. They want to buy a $685,000 investment property and estimate purchase costs, including stamp duty, at $31,400. Check current duty for your state.
| Home valuation | $940,000 |
| Current home loan | $388,500 |
| Usable equity (80% of $940,000 less $388,500) | $363,500 |
| Deposit needed (20% of $685,000) | $137,000 |
| Purchase costs (estimate) | $31,400 |
| Equity release loan against home | $168,400 |
| Investment loan against new property (80%) | $548,000 |
| Total new borrowing | $716,400 |
| Home LVR after equity release | 59.2% |
The homeowner uses $168,400 of their $363,500 usable equity and leaves about $195,100 untouched as a buffer. Total new borrowing of $716,400 equals the price plus costs, so the lender will need to be satisfied they can service roughly $1.1 million in combined debt. Figures are illustrative only.
Illustrative only. Figures are examples, not a quote or a recommendation.
Common mistakes
- Forgetting to include stamp duty and purchase costs in the equity release.
- Using every dollar of available equity and leaving no buffer.
- Putting both properties under one crossed loan without understanding the trade-offs.
- Mixing personal and investment borrowing in the same loan split, which can complicate tax deductions.
- Assuming approval because the equity is there, without checking serviceability first.
Frequently asked questions
Next steps
Talk to franklenn FINANCE
If you're thinking about using your home's equity to buy an investment property, book a free discovery call with franklenn FINANCE and we'll map out the numbers and structure with you.
This guide is general information only and does not consider your objectives, financial situation or needs. It is not financial, tax or legal advice. Lender policies, rates and government schemes change. Please speak with us, and with your accountant or solicitor where relevant, before acting.