The deposit for your next property is probably already sitting in your current one. Most homeowners with equity don’t realise how close they are to being able to act — because the calculation isn’t obvious until someone walks you through it.
The basic mechanics
Your lender will allow you to borrow up to 80% of your current property’s value. Subtract what you still owe. The remainder is your usable equity.
Example: property worth $900,000, mortgage balance $520,000. 80% of $900,000 = $720,000. Minus $520,000 = $200,000 in usable equity. That $200,000 can potentially be released and used as the deposit on an investment purchase — without touching your savings.
Two approaches to the loan structure
Separate loans for each property
Generally, the preferred approach for investors. Each property has its own loan, which keeps your portfolio flexible, makes future sales cleaner, and keeps your tax accounting straightforward. It’s more complex to arrange upfront, but worth it.
Cross-collateralisation
Both properties secure a single loan. Simpler to set up, but it hands the lender more control. If you ever want to sell one property or refinance, it complicates the process significantly. We generally steer clients away from this structure unless there’s a specific reason for it.
How lenders assess investment loans
Investment loans are assessed differently from owner-occupier loans. Lenders look at your total debt across all properties, count 70–80% of projected rental income (not 100%), apply the 3% serviceability buffer, and consider your overall debt-to-income ratio. This is why some investors find their capacity is less than expected — it’s the cumulative picture that determines it.
The tax picture
Interest on an investment loan is generally tax deductible. Depreciation on qualifying assets within the property can reduce your taxable income further. If the property is negatively geared, the loss may offset other income. These aren’t reasons to invest — but they’re worth understanding before you structure the loan. A property-focused tax adviser is worth involving early.
Where equity strategies go wrong
- Borrowing above 80% LVR on the investment — LMI costs add up and the buffer disappears
- Cross-collateralising without understanding what it means for future flexibility
- Underestimating the carrying cost of a vacancy or extended periods without tenants
- Not stress-testing the numbers at the 3% buffer rate — the buffer exists because rates move
Getting the structure right from the start is the difference between a portfolio that grows and one that creates problems. We model your specific numbers, compare loan structures, and identify which lenders treat rental income most favourably for your situation.
This is general information only and does not constitute financial advice. Using equity carries risk, including the possibility of losing your property if repayments cannot be met. Speak with a licensed mortgage broker and financial adviser before making any investment decisions. All loans are subject to lender approval.
Sources: ATO, Rental Properties 2024; APRA Prudential Practice Guide APG 223; RBA, Financial Stability Review 2024; CoreLogic, Australian Property Investment Report 2025.
