Most people assume the next property starts with saving another deposit. Years of putting money aside, watching prices move, wondering if you’ll ever catch up.
But for many Sydney homeowners, the deposit already exists. It’s sitting quietly in the property they own, growing in value and doing nothing. This is the story of one couple who put it to work, and the three moves that turned one debt-free property into a growing portfolio.
Quick answer: Can you use equity to buy an investment property? Yes. If your property has grown in value or you’ve paid down your loan, a lender may let you borrow against that equity. It can fund the deposit and costs of an investment purchase, without saving from scratch. How much you can use depends on your property’s value, your current loan and your borrowing capacity.
Meet the couple
He’s a solicitor. She works part-time as a registered nurse. They rentvest on Sydney’s North Shore, renting where they love to live and investing where the numbers make sense.
When they came to us, they owned one property outright. Strong incomes, no mortgage on that property and a clear goal: build a portfolio strategically, without overstretching.
What they didn’t have was a plan to turn that one property into the next, and the one after that.
The playbook: 3 moves that grew their portfolio
Move 1: Unlock the equity you already have
We used their debt-free property as security with the lender and released equity from it. That equity funded the deposits and costs for their next two investment properties. No years of saving required.
The lesson: a property you own outright isn’t just a home or an asset. It can be the launchpad for your next purchase.
Move 2: Don’t set and forget
Most people settle a loan and don’t think about it again. We reviewed their portfolio less than six months later and found one of the new properties had grown in value enough to create fresh equity.
That let us restructure their loans so the original property was no longer tied up as security. Their properties became less dependent on each other, which gave them more flexibility for whatever came next.
The lesson: your lender won’t call to tell you your property has grown in value. A regular review can uncover opportunities you’d otherwise miss.
Move 3: Use lender policy to build the next deposit
Using that property’s higher value, we increased its loan to 90% of the property’s value (known as LVR). Normally, borrowing above 80% means paying lenders mortgage insurance (LMI). By choosing a lender with an LMI waiver policy, they avoided that cost entirely. The equity released became the deposit for their next purchase.
The lesson: lenders have very different rules. Knowing which one fits your situation can save you thousands and bring your next step forward.
The scoreboard so far
| Where they started | Where they are now |
|---|---|
| 1 debt-free property | 2 investment properties settled |
| No plan for the next purchase | 1 property under contract and moving through finance |
| Saving was the assumed next step | A possible future purchase through their self-managed super fund (SMSF) |
They were happy enough with the process that the husband has since referred three of his colleagues to us.
Is this strategy right for you?
Using equity could be worth exploring if:
- You own a property that has grown in value, or you’ve paid down a good part of your loan
- You want to invest but assumed you’d need to save a new deposit first
- Your loans haven’t been reviewed in the last 12 months
- You have stable income and want a long-term property plan, not a quick win
When it may not be the right fit: Borrowing against equity means more debt and higher repayments, and property values can fall as well as rise. If your income is uncertain or you don’t have a healthy buffer, it may be wiser to strengthen your position first. A good strategy should make you feel confident, not stretched.
Frequently asked questions
Do I need to sell my property to use its equity? No. You keep the property and borrow against its value. The equity is released as a loan, which you then use towards the deposit and costs of your next purchase.
How do I know how much equity I have? Start with your property’s current value and subtract what you owe. Lenders usually let you borrow up to 80% of the value without LMI, so your usable equity is typically 80% of the value minus your loan balance.
What is an LMI waiver? Lenders mortgage insurance usually applies when you borrow more than 80% of a property’s value. Some lenders waive it for certain professions or borrower types, which can save you thousands of dollars.
How often should I review my home loan or investment loans? At least once a year, or whenever your property’s value changes noticeably. A review can uncover new equity, a better structure or a sharper rate.
Can I buy property through my super? Yes, a self-managed super fund (SMSF) can borrow to buy property under a limited recourse borrowing arrangement. The rules are strict, so it needs advice from your accountant or financial adviser as well as a broker.
If you own property and want to grow your portfolio, or your loans haven’t been reviewed in a while, let’s talk. Book a time with Loan Lounge and we’ll work out what your equity could do for you. Book a call through this link.
This content is general information only and does not take into account your personal objectives, financial situation or needs. It is not personal financial advice. Borrowing against equity and higher LVR lending increase your debt and risk, and property values can fall. LMI waivers and lending criteria vary between lenders and change over time. SMSF property purchases have strict rules and should be discussed with a licensed financial adviser and accountant. Please speak to a mortgage broker before making any decisions.