Unlocking the Power of Equity: A Guide to Buying Investment Property with Ease

By Deltos Finance on July 29, 2023
using equity to buy investment property

Investing in property has traditionally been a popular path to building wealth for many Australians. For homeowners with accumulated equity, it presents an opportunity to expand their real estate portfolio. In the Australian real estate market, despite the peaks and troughs, property values have shown consistent growth over the years. This is why many people choose to tap into their equity to build their  investment property portfolio. But how should you go about it?

We’ll explore how you can harness the power of equity to purchase an investment property. Additionally, we’ll delve into Deltos Finance’s expert guidance — how they may help ensure a seamless & successful investment journey.

First, Let’s Talk About Equity and Usable Equity

Equity reflects the difference between your property’s current market value and the outstanding amount you owe on your mortgage. When you purchase a property with a home loan, you make regular mortgage payments to reduce the loan balance, and over time, as property values appreciate, the equity in your property grows. Equity can be thought of as a form of wealth you have built up in your home.

For instance, if your property is currently valued at $500,000, and you still owe $100,000 on your mortgage, your equity in the property would be $400,000. But the question is: can you access and use that equity to buy an investment property? 

This is where understanding the term “usable equity” comes in handy. Usable equity refers to the portion of equity that lenders take into consideration when assessing your borrowing capacity. While you may have accumulated significant equity in your property, not all of it may be accessible for borrowing purposes.

You can determine the usable equity by calculating 80% of your property’s current value and then subtracting the outstanding mortgage amount. So using the example above, if your home is currently valued at $500,000 and you still owe $100,000 on your mortgage, you can calculate the usable equity using the following equation:

$500,000 x 0.8 = $400,000

Subtract $100,000 in existing loans.

Therefore, your usable equity would be $300,000.

When you know your usable equity, you can make informed financial decisions, such as using it to invest in another property or financing other significant expenses. 

Leveraging Usable Equity: Strategies for Buying Investment Property

Now that you understand the difference between equity and usable equity, it’s time to learn how to buy investment property with equity. Here are some strategic ways to leverage usable equity and capitalise on the Australian real estate market’s wealth-building opportunities:

Home Equity Line of Credit Loan

A home equity loan, also known as a line of credit or equity loan, allows homeowners to tap into their usable equity as a separate loan. This additional cash can be used as a deposit for an investment property. Homeowners generally only pay interest on the amount used, gaining flexibility & control over their financial situation.

Equity Release

Refinancing your existing home loan may enable you to access additional funds from your usable equity, which can then be directed towards the purchase of a rental home or any investment property. This strategy may involve changing your loan structure, terms or interest rates to suit your investment goals better.


While less common, cross-collateralisation involves using the equity in your current property as security for an investment loan. It’s when a loan (or multiple loans) are secured by multiple properties. This approach can help to reduce risk for the lender, which sometimes helps to get a better interest rate, and may offer taxation benefits. However, cross-collateralization may carry higher risks for the homeowner. This is because your property portfolio loans are with one lender and the cumulative values impact your overall loan to value ratio (LVR). This can cause complications when seeking more finance or looking to sell one of your properties. Hence, seeking expert advice is essential before considering this strategy.

using equity to buy investment property

Key Considerations Before Buying Investment Property with Equity

As with any significant financial decision, it’s essential to assess your circumstances and the potential implications of using equity to buy an investment property. Here are some critical factors to consider:

  • Financial Stability: Evaluate your financial stability and capacity to manage the additional financial responsibilities of owning multiple properties. Consider factors such as rental income, property management costs and possible vacancies.
  • Investment Strategy: Define your investment strategy and long-term goals. Determine whether you seek rental income, capital appreciation, or a combination of both. Then, align the investment property with your overall wealth-building plans.
  • Loan Structure: Speak to a mortgage broker to determine the most suitable loan structure for your situation. The right loan structure can impact cash flow, tax benefits and long-term returns on your investment.
  • Risks and Rewards: Understand the risks and rewards associated with property investment in the Australian market. Spend ample time conducting thorough research on property market trends, rental demand and potential capital growth in the chosen location.

Deltos Finance: Your Trusted Partner in Property Investment

Simply put, using home equity to buy investment property requires expert guidance — Deltos Finance is here to help. As Hobart’s #1 mortgage broking team, our experienced brokers specialise in assisting Australian homeowners with their property investment dreams. We may start with a comprehensive assessment of your financial situation to determine the amount of usable home equity. Then, we’ll explore the best loan options that align with your investment goals.

Our extensive network of lenders allows us to secure competitive interest rates and loan products in the Australian market. More importantly, we handle the paperwork, negotiations and application process, making the journey from equity to investment property ownership seamless and effortless.

With Deltos Finance’s expert guidance and personalised support, you can confidently unlock the potential of your equity and embark on a successful investment journey. Reach out to us today to get started. 

Enquire Now

Find Your Perfect Finance Solution

Let's discuss your finance needs. We’re here to help.

More posts from Deltos Finance

first home guarantee scheme

The First-Home Buyers 5% Home Loan Deposit Scheme Explained

As a first-time home buyer in Australia, one of the biggest hurdles you’ll face is coming up with a substantial deposit. Traditionally, lenders have required a deposit of at least 20% of the property’s value, but what if you could secure your dream home with just a 5% deposit? That is possible through the First […]

costs of buying a house

What Are the Upfront Costs of Buying a Home?

Are you searching for a one-bedroom apartment close to the city or planning to a big house with a garden in one of the best Tasmanian suburbs? Either way, it pays to know the upfront costs of buying a house apart from the home loan deposit. These costs may include government taxes and other associated […]

buying your first home

The Ultimate First-Home Buyer Checklist

Although owning your first property is incredibly exciting, it can also be complicated, time-consuming and a bit stressful. So, today, we’ll make your home-buying experience less confusing, smoother and more convenient. Here’s our ultimate first-home buyer checklist to help you know what to do and expect at every step. 1. Budget for Deposit & Other […]

local mortgage broker benefits

The Advantages of Engaging a Local Mortgage Broker

When you’re in the market for a new home, you’re bound to face several challenges—from overlooking loan comparisons to underestimating additional upfront costs and avoiding other common home loan mistakes. You might also be tempted to go directly to a bank, but there’s a compelling case for choosing a local mortgage broker instead. Today, we’ll […]

first home super saver scheme

Can First-Home Buyers Use Their Super for a Deposit?

You already know what you want for your first home. You even have nailed down the specifics—from the location or suburb to the number of rooms you want. The only problem left is the deposit. Like most Australians, you probably have a difficult time saving enough for the optimal home loan deposit amount.  In Tasmania, […]

regional first home buyer guarantee

A Quick Guide to Regional First Home Buyer Guarantee

It’s no secret that buying your first home comes with certain challenges, especially when you need to pay for a substantial deposit. However, if you’re looking to buy in regional Australia, the Regional First Home Buyer Guarantee (RFHBG) could be the helping hand you need. Today, we’ll provide a quick guide to help you understand […]

stamp duty concessions tasmania

Buying a House in Hobart? Here’s What You Need to Know About Stamp Duty Concessions in Tasmania

When you purchase a house or investment property in Hobart, Tasmania, you will likely pay a stamp duty—just like in all other states of Australia. Stamp duty can be a hefty upfront cost, so you may wonder whether concessions or exemptions are available. Today, we’ll help discuss how stamp duty works, how it is calculated […]

A young couple buying their first home.

Can You Use the First Home Owner Grant as a Deposit?

Dreaming of owning your first home in Australia? While you can use all your savings to pay for your home deposit, you must know that there are government grants that can help lower the initial cost of your first home purchase. Today, we’ll zero in on one of those grants: the First Home Owner Grant […]

how long does it take to refinance a home loan

How Long Does It Take to Refinance a Home Loan?

Switching to a new home loan, also known as refinancing, is a wise move, especially when you want to take advantage of lower interest rates or access the equity in your property. But how long does it take to refinance a home loan in Australia?  Refinancing may seem lengthy and overly complicated, but it can […]

first home owners grant

Five Common Questions About the First Home Owner Grant in Tasmania

Are you considering purchasing your first home in Tasmania soon? Before you apply for home loans, it pays to know that the Tasmanian government offers various grants and incentives to help you save money on your first big purchase. You can start by learning about the First Home Owner Grant in Tasmania. Today, we’ve compiled […]