Investing
How to use equity to buy your first investment property
7 min read · By Daniel Lagden · 4 June 2026
The short version
- Usable equity is roughly 80% of your home's value minus what you owe.
- Equity can fund the deposit and costs on an investment property.
- Keeping the investment loan separate protects your tax position.
- Borrowing against your home to invest increases your total risk.
Plenty of first-time investors assume they need to save a fresh cash deposit. Often they don't — the equity already sitting in their home can do the job. Understanding how that works is the difference between waiting years and moving now.
What is usable equity?
Equity is your property's value minus what you owe. 'Usable' equity is the part a lender will let you access — commonly up to 80% of the value minus your current loan. On a $900,000 home with a $400,000 loan, 80% of value is $720,000, so usable equity is around $320,000. (Borrowing above 80% may be possible but can trigger LMI.)
How it becomes a deposit
You release equity by increasing or splitting your home loan, then use those funds for the deposit and purchase costs on the investment. The investment property itself secures the main investment loan. Done well, you buy without touching your cash savings.
Keep it clean for tax
Structure matters enormously here. The portion of borrowing used for investment is generally treated differently for tax than your home loan. Mixing them in one account can create a tax mess. Keep the investment borrowing in its own split and talk to your accountant — this is general information, not tax advice.
The risk to understand
Using your home's equity to invest means your home is now part of the security for an investment. If values fall or things go wrong, the stakes are higher than investing with separate cash. That's not a reason to avoid it — it's a reason to structure it carefully, keep buffers, and make sure the numbers work even if rates rise or the property sits vacant for a while.
Run the numbers
Frequently asked questions
How much equity do I need to buy an investment property?
Enough to cover the deposit (often 10–20% of the investment's price) plus purchase costs, drawn from your usable equity. Usable equity is roughly 80% of your home's value minus your current loan. We can calculate yours quickly.
Do I have to cross-secure my home and the investment?
Not necessarily, and many investors prefer to avoid 'cross-collateralisation' so the two properties stay independent. A common approach is an equity release split on your home for the deposit, with a standalone loan against the investment. Structure depends on your goals.
Is the interest on an equity release tax deductible?
Generally, deductibility follows the use of the funds — borrowing used to invest is treated differently to borrowing for personal use. This is exactly why the investment portion should be kept separate. Confirm your position with your accountant.
