How to use equity to buy an investment property
Using equity means borrowing against the home you already own to fund the deposit and costs on an investment property, so the new property carries its own loan and you put in no cash. Lenders will usually lend against 80% of your home's value, and the deposit that buys is what NAB calls the rule of four. This guide works the numbers on a $900,000 home, explains the two ways to structure it, and lists what the lenders publish.
- Usable equity is 80% of your home’s value minus what you owe: $400,000 home, $220,000 owing, $100,000 usable (NAB and ING both publish this example)
- That $100,000 covers a 20% deposit plus about 5% costs on a $400,000 property (NAB’s rule of four); ING publishes borrowing up to five times usable equity
- Structure it as a separate equity split against the home plus a standalone investment loan against the new property, not one cross-collateralised loan
- Serviceability on the combined debt, not equity, is usually the binding limit; the rent counts but lenders shade it
- The equity split’s interest is generally deductible because the purpose is investment; keep it separate from personal borrowing and get tax advice
WARNING: This comparison rate is true only for the example given and may not include all fees and charges. Different terms, fees, or other loan amounts might result in a different comparison rate. Comparison rates are based on a secured loan of $30,000 over 5 years for vehicle finance and $50,000 over 5 years for equipment finance, as required under the National Credit Code.
How much equity can you use?
Lenders work from the loan-to-value ratio on your home after the new borrowing, and the line they publish is 80%. ING puts it plainly: lenders will typically only lend against 80% of your home's current value, to allow for dips in prices. So usable equity is 80% of the value minus the current balance. NAB and ING both publish the same example: a home worth $400,000 with $220,000 owing has $180,000 of equity, but 80% of $400,000 is $320,000, so the usable equity is $100,000. The bank's valuation sets the value, and ING publishes that a new valuation is the step that turns the estimate into a number you can borrow against.
Worked example: a $900,000 home with $500,000 owing
| Step | Calculation | Amount |
|---|---|---|
| Bank valuation of your home | — | $900,000 |
| Maximum lending at 80% LVR | $900,000 × 80% | $720,000 |
| Less current loan balance | $720,000 − $500,000 | $220,000 usable equity |
| Indicative purchase price (rule of four) | $220,000 × 4 | About $880,000 |
| Deposit on the new property at 20% | $880,000 × 20% | $176,000 |
| Purchase costs at about 5% | $880,000 × 5% | About $44,000 (stamp duty varies by state) |
| Investment loan on the new property | $880,000 − $176,000 | $704,000 |
| Total debt after the purchase | $500,000 + $220,000 + $704,000 | $1,424,000 |
The last line is the one lenders assess. Equity tells you the deposit you can raise; serviceability tells you whether your income and the expected rent can carry $1.42 million of debt under a buffered rate. Rent counts, but lenders shade it and add the holding costs NAB lists: lender fees, settlement adjustments, property management, insurance, maintenance and a vacancy buffer. Run the borrowing power calculator on the combined position before you fall in love with a suburb, and use the stamp duty calculator for the real costs line in your state.
Two ways to structure it
Standalone. A separate equity split of $220,000 is set up against your home, secured only by your home, and a separate investment loan of $704,000 is set up against the new property, secured only by that property. Each property can be sold or refinanced on its own, a shortfall on one does not reach the other without a new decision from the lender, and the interest on the $220,000 is cleanly traceable to the investment. This is what most brokers recommend and what ANZ's supplementary loan and Westpac's separate loan account are built for.
Cross-collateralised. One loan, or two with the same lender, secured by both properties together. The lender may offer it because it holds more security, and it can get a purchase over the line when the equity is marginal. The cost is flexibility: selling or refinancing either property needs the lender's consent and usually a revaluation of the other, and the home is on the hook for the investment. If a lender proposes it, ask why the standalone structure does not work first.
What do lenders publish on using equity to invest?
Checked against each lender's published page on 20 September 2026; "Not published" means the page does not state it. Policies change without notice, so confirm before relying on them.
| Lender | Usable equity rule | Deposit guidance | Valuation | Other published terms |
|---|---|---|---|---|
| NAB | 80% of value minus loan: $400,000 home, $220,000 owing, $100,000 usable | Rule of four: $100,000 usable equity, $400,000 target price, $80,000 deposit plus about 5% costs; 20% deposit to avoid LMI, or pay LMI to buy with less | On request, or in the app for existing customers | Lists holding costs to budget: lender fees, settlement adjustments, management, insurance, maintenance, vacancy buffer |
| ING | Lends against 80% of current value; same $100,000 example | Rule of thumb: borrow up to five times usable equity for an investment property | Ask for a new valuation once budgeting is done | Allow for weeks without rent every year or two; strata and management fees named |
| CommBank | Usable equity at 80%: $750,000 home, $400,000 owing, $200,000 | Not published | Bank valuation in the example | Top up online or with a Home Lending Specialist; LMI may apply by amount and valuation |
| Westpac | 80% of current value; beyond with LMI | Not published | Covers the first valuation on a top-up | Investors eligible for loan increases; recommends professional tax advice before increasing an investment loan; separate account on fixed loans |
| ANZ | LVR determines eligibility | Not published | Not published | Supplementary Loan as the equity route; investment property named as a use |
| Unloan | At or below 80% after drawdown: $800,000 home, $400,000 owing, $240,000 | Investment deposits named as a purpose | Arranged in the application | Purpose and evidence may be asked |
| Bankwest | Depends on equity | Not published | One standard valuation free | Purchasing an investment property named; suggests combining with the existing loan (cross-collateral) |
The tax point that decides the structure
Interest is deductible according to what the borrowed money was used for, not what secures it. The $220,000 split used for the investment deposit is investment borrowing even though it is secured by your home; a $20,000 redraw from the same account for a holiday is not. Mixing them in one account makes the interest apportionment a permanent bookkeeping problem. Keep the equity split separate, do not redraw personal spending from it, and get the structure signed off by your accountant before settlement rather than at tax time. Westpac publishes the same recommendation for investors increasing a loan.
What can go wrong, and how a broker helps
The three failure points are a valuation below your estimate, serviceability that stops short of the combined debt, and a lender that will only do the deal cross-collateralised. A broker gets ahead of all three: an indication of the likely valuation from comparable sales, a serviceability run across several lenders whose rental shading and expense treatment differ, and a structure that keeps the properties standalone. Your Finance Guide refers you to one licensed broker partner whose practice includes investors; we do not lend or assess applications ourselves. The investment property broker guide covers what to ask them.
Investor and equity guides
The numbers, the structures and the broker.
Using equity to invest: FAQs
What is the 80/20 rule in property investment?
How do you use equity to buy another investment property?
Is it a good idea to release equity to buy another property?
How much would a $100,000 home equity loan cost per month?
Can I use equity as the whole deposit, with no cash?
Do I need a new valuation?
Should the two properties be cross-collateralised?
Is the interest on the equity loan tax deductible?
Turn equity into a deposit without the wrong structure
Tell us your home's value, what you owe and the price range you are looking at, and we refer you to one licensed broker partner who runs the equity and serviceability numbers, structures the split for tax, and lodges one application. Free for borrowers, no obligation.