How To Use Equity To Buy An Investment Property

Short answer: yes. If you own a home in Queensland and you've either paid down the loan or watched the property gain value, you can put that equity to work as the deposit on your next purchase instead of starting the savings grind all over again.

Equity is the difference between what your home's worth and what you still owe. Lenders let you borrow against a portion of that difference and use it as the deposit and costs on the next property. It's the reason most second properties in Australia are bought with equity, not fresh savings.

You're not the only one weighing this up. APRA's March 2026 figures show new investment loans made up 35.0% of all new residential mortgages funded that quarter, up 1.51 percentage points on a year earlier. Using equity to buy an investment property is the standard path now, not the exception.

There's total equity, and there's usable equity. They're not the same number, and confusing the two is where most people get their expectations wrong.

Total equity is your property's value minus what you owe. Usable equity is what a lender will actually let you borrow against, which is generally capped at 80% of the property's value less the loan already on it. That 80% figure is the loan-to-value ratio (LVR), a measure of how much of the property's value is borrowed versus owned outright. Lenders stop at 80% to keep you out of lenders mortgage insurance territory.

Here's how the maths looks:

You can push above 80% in some cases, but you'll be paying LMI on top. Rarely worth it for an investor unless the deal is exceptional.

Rule of thumb most brokers use: you need roughly 20-25% of the new property's price in equity to cover the deposit and all the buying costs. On a $500,000 investment property, that's around $100,000 to $125,000 of usable equity.

Why not just a flat 20%? Queensland transfer duty. Investors don't get the home concession, so the duty bill is heavier than an owner-occupier would pay. QRO's rates put transfer duty on an $850,000 Queensland investment purchase at $31,275, with no concession available. Add legal fees, lender fees, building and pest, and a small buffer, and you can see why 20-25% is the honest figure.

Usable equity is only half the picture. The other half is what the bank will actually lend you against your income. Worth checking your borrowing capacity so both sides of the equation stack up.

Three practical ways to get at it:

1. Refinance to a new lender and increase the loan at the same time, taking the extra as cash or a separate split for the investment deposit.
2. Top-up your existing loan with your current lender. Simpler, but only worth it if their rates and policy still stack up.
3. A separate equity loan or split kept alongside your existing home loan.

Whichever path you take, the lender re-tests you. APRA requires banks to add a serviceability buffer of at least 3.0 percentage points on top of the loan rate when assessing whether you can afford the new debt. So even if your current repayments feel comfortable, the bank stress-tests you at a higher rate before releasing equity.

The bigger decision is how the loans sit together. You can cross-collateralise, where both properties secure both loans, or keep them standalone, where each property secures its own loan.

We almost always prefer standalone. Cleaner tax treatment, easier to sell one property later without the other being caught up in it, and simpler if you ever want to switch lenders on one loan. Cross-collateralisation looks tidy on day one but can be harder to unwind later. 

If your existing loan isn't with the right lender for the top-up, we'll refinance to release equity as part of the same process.

Here's how it plays out for a typical Brisbane owner.

Starting position
- Home value: $700,000
- Loan owing: $300,000
- 80% of value: $560,000
- Usable equity: $260,000

The investment purchase
- Investment property price: $500,000
- 20% deposit needed: $100,000
- QLD transfer duty (investment, no concession, using QRO's bracket of $17,325 plus $4.50 per $100 over $540,000): approximately $8,750 at $500,000
- Legals, lender fees, building and pest: around $3,000
- Total cash needed at settlement: roughly $111,750

Your $260,000 of usable equity comfortably covers the $111,750 needed, with room to spare for a small buffer.

New debt position
- Existing home loan (unchanged or refinanced): $300,000
- New equity release split (deposit + costs): $111,750
- New investment loan (80% of $500,000): $400,000
- Total debt across both properties: $811,750

That last number is the one that matters. Not the deposit. The total debt. That's what you're servicing every month, which is why it's worth running the repayment numbers before you make an offer.

Using equity as a deposit is a good move for a lot of people. It's not a good move for everyone.

Push above 80% LVR on the equity release and you're into LMI territory. MoneySmart notes that if a home loan LVR is above 80%, the borrower may need to pay lenders mortgage insurance, which can add thousands to the cost of the purchase.

Your total debt goes up too. Repayment shock is real if rates move or a tenant is slow to pay. APRA's 3 percentage point serviceability buffer exists for exactly this reason, and lenders are watching debt-to-income ratios more closely now. In March 2026, 10.8% of new investment loans funded had a DTI of 6x or more, up 2.56 percentage points year on year. Regulators are paying attention. So should you.

The other risk is negative equity if property values dip after settlement. Not a reason to avoid the strategy. It is a reason not to stretch to the last dollar.

This is where a good structure earns its keep.

Keep the investment loan separate from your home loan. Not just a different account number. Structurally separate splits, so the interest on the investment portion is clearly identifiable. The ATO's rental properties guide is strict on apportioning mixed-purpose loans, and blending them creates a headache at tax time every single year you own the property.

Most investors go interest-only on the investment portion while keeping principal and interest on the home loan. The tax-deductible interest on the investment sits on one loan, and any spare cash goes into an offset account against the non-deductible home loan debt.

That combination, standalone loans, interest-only on the investment, offset against the home, is the setup we build most often. It's not clever for the sake of clever. It's cleaner, and it holds up if life or the portfolio changes later.

Victor Kalinowski has been doing this for 19+ years, and Blackk has been running in Queensland since 2007. In 2025, 99.6% of the loans we submitted were approved.

We compare 50+ lenders, so the equity release goes to the bank with the right valuation policy and the right investment loan policy, which are rarely the same lender. We build the structure once, properly, and walk you through the numbers before anything is signed.

That's what our investment property lending work looks like from your side of the desk. Calm, numbers on the table, no surprises.