There’s a question that comes up almost every week in our office: “I’ve got equity in my home — can I use it to buy an investment property?”
The short answer is yes. The longer answer involves understanding how much you can actually access, which lender will structure it properly, and how to avoid the mistakes that trip up first-time investors.
Here’s how it actually works — with real numbers.
The Equity Play: A Real Sydney Example
Let’s say you bought your home in Parramatta in 2019 for $750,000. You’ve been paying down your mortgage and the market has moved — it’s now worth $1.1 million. Your remaining loan is $480,000.
Your total equity is $620,000. But usable equity? That’s a different number.
Most lenders will let you borrow up to 80% of your property’s value without needing Lenders Mortgage Insurance (LMI). So the ceiling here is $880,000 (80% of $1.1M). Minus your existing $480,000 loan, you’ve got approximately $400,000 in accessible equity.
That $400,000 can become the deposit — and more — on an investment property. If you’re targeting a $600,000 unit in Liverpool or a $750,000 townhouse in Penrith, you can potentially buy it with little to no cash out of pocket.
Why This Gets Complicated Fast
The maths looks clean on paper. In practice, it’s where things get messy — and where most people hit a wall when they go directly to their bank.
The problem is serviceability. You now have two loans: your home loan and the investment loan. The bank has to assess whether your income can support both. Different lenders use different assessment rates, different shading on rental income, and different ways of counting existing debt.
Commonwealth Bank might shade rental income at 75% for serviceability purposes. Macquarie might use 80%. One lender might stress-test your repayments at 7.5%; another at 8.5%. That gap of 1% can mean the difference between being approved and being told to come back when you earn more.
And if you have other debts — a car loan, a credit card with a $10,000 limit you never use, HECS — those all affect your borrowing capacity in ways that vary dramatically between lenders.
How a Mortgage Broker Actually Helps Here
When you walk into your bank, they assess you against their policy. That’s it. One set of rules. If you don’t fit, they say no.
A mortgage broker compares dozens of lenders simultaneously. More importantly, a good broker knows which lender’s policy actually suits your situation — before a single application goes in.
Here’s a real scenario: a client came to us after being knocked back by their bank for an investment loan. They were earning $145,000 a year, had $380,000 in usable equity, and were targeting a $680,000 property with an expected rental yield of $560/week. On paper it should have worked. The bank said no because of an outstanding car loan ($28,000) and two credit cards with combined limits of $18,000 — even though both were paid in full monthly.
We found a lender who assessed the cards based on actual utilisation rather than limits, structured the equity release as a separate line of credit, and got the deal across the line within three weeks. Same client. Same income. Different lender.
Interest-Only Loans for Investors: Still a Smart Move?
Most property investors opt for interest-only (IO) repayments on their investment loan — at least for the first 5 years. The logic is straightforward: you’re not here to pay down someone else’s asset. You want to hold the property, collect rent, benefit from capital growth, and maximise the tax deductibility of your interest payments.
Under IO terms, on a $600,000 investment loan at 6.29% (a current indicative rate as of mid-2026), your monthly repayment is roughly $3,145 — compared to $3,730 on principal and interest. That $585/month difference goes toward your owner-occupied mortgage or into your offset account, which reduces your non-deductible debt faster.
The catch: IO periods end. And when they do, the jump in repayments can sting if you haven’t planned for it. A broker helps you structure the loan with a clear exit strategy — refinance at year 4, convert to P&I, or roll into the next purchase.
What About Cross-Collateralisation — and Why You Should Avoid It
Here’s a trap we see all the time: a client goes to their existing bank, uses their home as security for the investment loan, and ends up with both properties tied together under one lender. This is called cross-collateralisation, and it gives the bank enormous leverage over you.
If the investment property drops in value or you want to sell one property, the bank controls the whole picture. We generally recommend keeping your owner-occupied and investment securities separate — either with different lenders or structured carefully as standalone loans.
This is the kind of structuring detail that rarely comes up in a bank branch conversation. It’s standard practice for a mortgage broker.
The Costs to Factor In
Before you run the numbers, here’s what to budget for when purchasing an investment property in NSW:
- Stamp duty: On a $650,000 investment purchase (no concessions for investors), that’s approximately $25,215.
- Conveyancing: $1,500–$2,500.
- Building & pest inspection: $500–$800.
- Loan establishment fees: Varies by lender, often $0–$600.
- Property management: Typically 7–10% of weekly rent in Sydney metro.
If you’re using equity, most of these can be funded from the equity release — meaning your actual cash outlay can be close to zero. But only if the equity is structured correctly from the start.
Ready to Run the Numbers on Your Situation?
Every property investor’s situation is different. The equity in your home, your income structure, existing debts, and the type of property you’re targeting all affect which lender and which structure actually works for you.
At Loan Connect, we work with investors across Sydney — from first-time landlords using a single equity release through to clients with portfolios of four or five properties. We don’t charge broker fees. We get paid by the lender, which means our job is to find you the deal that actually fits.
If you’ve got equity and you’re wondering whether now is the right time to move — get in touch. We’ll run a proper serviceability assessment, compare your options across 40+ lenders, and give you a clear picture before you commit to anything.
No obligation. No jargon. Just straight answers.