How do I use equity to invest in property?

Why read this article

Learn how to use your home’s equity to invest in property

• Understand what equity is and how it works.
• Learn how equity can be used as a deposit.
• Discover how leverage can help you build wealth through property.

For many Australians, their home is their biggest asset — but often the most underutilised. What many people do not realise is that equity built up in their home may be used to help fund an investment property, creating a pathway to build wealth over time. With the right approach, equity can act as both a deposit and a tool to help build wealth through property.

 

What is equity?*

Equity is the difference between your property’s current value and the amount you still owe on your mortgage.

For example, if your home is worth $900,000 and your loan balance is $400,000, your equity is $500,000. While you cannot usually access all of that equity, lenders may allow you to release a portion of it, subject to lending criteria and your financial circumstances.

 

How much equity do I need to buy an investment property?*

Lenders commonly require a deposit equivalent to around 20% of a property’s value.

For example, if you were purchasing a $600,000 investment property:

• Loan amount (80%) = $480,000
• Deposit required (20%) = $120,000

Rather than saving the entire deposit in cash, some homeowners use available equity from their existing property. This is one way equity can be used as part of an investment property strategy.

 

Case Study: Tom and Tanya*

Tom and Tanya own a family home valued at $1,000,000 and have a mortgage balance of $500,000. They are considering purchasing a $500,000 investment property.

• Deposit required: $100,000
• Investment loan: $400,000
• Equity in their home: $500,000

By accessing $100,000 of available equity, they are able to fund the deposit without using their cash savings.

If the investment property were to increase in value by 6% per annum, this would equate to approximately $30,000 in growth in the first year. Over ten years, a property purchased for $500,000 would have increased in value by approximately $300,000 based on a simple growth assumption, although actual outcomes will vary.

 

The power of leverage*

One reason property is often discussed as a wealth-building asset is leverage.

Unlike many other asset classes, lenders are generally willing to lend a significant proportion of a property’s value. This means that every dollar of equity or savings can potentially control a larger asset.

For example, $100,000 of equity or savings may provide access to a property worth around $500,000, subject to lending approval and borrowing capacity. This allows investors to benefit from changes in value across the entire asset rather than just their original contribution.

 

Make inflation your friend

Inflation reduces the purchasing power of cash over time. Historically, however, residential property values and rents have tended to rise alongside inflation over the long term.

As the cost of construction, labour and housing increases, property values and rental income may also increase. For this reason, many investors view property as an asset that can help offset the effects of inflation.

 

Tax considerations

Another consideration when using equity to buy an investment property is the potential tax treatment of investment property ownership.

Depending on individual circumstances and prevailing legislation, expenses associated with holding an investment property may be deductible, which can influence overall cash flow. As tax rules and government policies can change over time, investors should seek advice from a qualified tax professional before making any decisions.

 

Building wealth through property

Once a property increases in value, investors may be able to access additional equity to help fund future opportunities.

Over time, this approach may help build wealth and create additional sources of income, subject to lending criteria, market conditions and individual circumstances.

 

Key considerations before using equity

• Valuations matter: Your lender’s valuation determines how much usable equity is available.
• Buffers are essential: Consider interest rates, vacancies, maintenance costs and unexpected expenses.
• Professional advice matters: A mortgage broker, accountant, solicitor or property professional can help you understand the factors involved.

Used wisely, equity is more than just numbers on a bank statement. For many Australians, it can be a way to put existing assets to work and support long-term wealth-building objectives.

How Accrue Real Estate Helps

At Accrue Real Estate, we help Australians understand how equity can be used to invest in property and build long-term wealth. Through research, due diligence and access to investment opportunities across Australia, we help clients explore how to leverage existing equity, identify high-demand markets and understand the factors involved in property ownership. With more than 15 years of experience and a research-driven approach, our team focuses on helping clients make informed property decisions with greater confidence.

Note on Calculations

The financial calculations and examples contained in this article, including the Tom and Tanya case study and growth assumptions, are illustrative only and are intended to demonstrate concepts such as equity, leverage and compounding. Examples assume an 80% loan-to-value ratio commonly used by Australian lenders, although actual borrowing capacity and lending criteria vary. Property growth assumptions are based on long-term Australian residential property market data and historical averages of approximately 5–7% per annum from CoreLogic (https://www.corelogic.com.au) and Reserve Bank of Australia housing statistics (https://www.rba.gov.au/statistics/tables/). Inflation assumptions are based on the Reserve Bank of Australia’s Inflation Calculator (https://www.rba.gov.au/calculator/annualDecimal.html). Actual outcomes will differ depending on market conditions, property type, lending policies and individual circumstances.