Can I Use the Equity in My Own Home as a Deposit for an Investment Property?
Yes, many lenders let you use equity in your home toward an investment property deposit. How usable equity, LVR and the risks actually work.
Can I use the equity in my own home as a deposit for an investment property?
Yes — this is a common, well-established route, and most lenders will consider it. Rather than saving a separate cash deposit, you use the value already built up in your home (its “equity”) as security to borrow the deposit and purchase costs for a second, investment property. In practice this usually happens one of two ways: your existing home loan is increased (“topped up”) and the extra amount is drawn out, or you take out a separate loan or line of credit secured against your home.
Whether it’s available to you, and how much, depends on your lender’s own assessment of your equity, your income, and your ability to service both loans — not a fixed rule. This article works through how usable equity is generally described, how lenders typically assess the new borrowing, and the risks specific to using your home as security for someone else’s — in this case, an investment property’s — finance.
What is “usable equity,” and how much is typically available?
Equity is simply the difference between what your home is worth and what you still owe on it. “Usable equity” is the smaller, more conservative figure lenders actually work with — because most lenders won’t lend against the full value of your home.
A common way lenders and brokers describe usable equity ties directly to a figure that is verified: as at July 2026, Moneysmart states that lenders mortgage insurance (LMI) usually becomes payable once the amount borrowed exceeds 80% of a property’s value — the 80% loan-to-value ratio (LVR) threshold. Many lenders apply that same 80% figure when working out how much equity in your home is available to borrow against without triggering LMI on the home loan itself: broadly, 80% of your home’s current bank valuation, minus what you still owe on it.
Two things are worth separating here. First, a bank’s own valuation of your home is often more conservative than an agent’s appraisal or your own estimate — usable equity is worked out on the bank’s figure, not the market one. Second, this 80% approach is a widely used convention, not a legislated number — the exact percentage, and how much of your equity a lender will actually release, is set by that lender’s own policy and your individual circumstances. Neither this article nor any single source can tell you the figure that applies to you.
How do investors actually access that equity to use as a deposit?
There are two structures people commonly use, and they carry different implications for your existing home loan.
| Structure | How it typically works | What stays linked to your home |
|---|---|---|
| Increase (top up) your existing home loan | Your lender revalues your home and increases your loan limit; you draw the difference as cash | The extra amount becomes part of your original home loan |
| Separate equity loan or line of credit | A new, distinct facility is set up secured against your home, alongside your existing home loan | A second, separate debt secured by the same property |
Either way, the funds released are then generally used as the deposit and purchasing costs (such as stamp duty and conveyancing — Moneysmart notes stamp duty is a one-off state property-transfer tax, with the amount set per state or territory) for the investment property, which typically still needs its own separate loan to fund the rest of the purchase price. You end up, in effect, servicing three things at once: your original home loan, the equity borrowing against your home, and the loan on the investment property itself — even though only one property (the family home) increased its own borrowing.
If the total amount borrowed against your home — original loan plus the new equity portion — pushes you back above that 80% LVR mark, LMI can become payable on your home loan again, even though nothing changed about the home itself. Moneysmart’s LMI page states this threshold generally, with no different rule for investment-related borrowing — the same 80% figure applies whichever purpose the extra funds are for. It’s also worth remembering what LMI actually protects: it covers the lender if you default, not you or any guarantor. No government body publishes a standard LMI premium figure for any borrower type; if you want an illustrative estimate, mortgage insurers such as Helia publish fee-estimator tools, but any number they return is that insurer’s own illustrative figure, not a market average.
Does a lender assess this differently because the new property is an investment?
The underlying regulatory framework is the same one that covers your existing home loan, applied to a different purpose. Australia’s National Credit Code brings residential investment lending in under its own limb — “to purchase, renovate or improve residential property for investment purposes” — separately from the owner-occupier “personal, domestic or household purposes” limb, but both sit inside the same regulated-credit regime. As at July 2026, ASIC’s Regulatory Guide 209 requires the same responsible-lending steps either way: reasonable inquiries into your situation, reasonable verification, and an assessment of whether you can meet the repayments without substantial hardship — for the equity borrowing against your home and for the loan on the investment property.
A few things specific to investment lending are worth knowing before you go further:
- Rental income is not counted in full. APRA’s prudential guidance describes a minimum 20% “haircut” on expected rental income as prudent practice for lenders assessing serviceability — so the rent the new property is expected to earn isn’t simply added to your income at face value.
- A rate buffer applies to all your debts, not just the new loan. The same APRA guidance describes lenders applying an interest-rate buffer of at least 3.0 percentage points over a loan’s rate — applied to new and existing debt commitments, which includes your home loan and the equity portion, not only the investment loan.
- Investor loans are typically priced a little higher. As at July 2026, RBA lending data (Table F6, May 2026) shows investors typically paying around 0.2 percentage points more than owner-occupiers on outstanding loans. This is a system-wide average, not a promise about what any individual lender will charge you.
Specific numbers beyond these — a particular lender’s maximum LVR for this kind of borrowing, its own rental-income haircut, or its investor rate — are that lender’s own policy and vary between institutions; nothing here should be read as describing any one lender’s criteria.
What is cross-collateralisation, and why does it come up with this strategy?
When you use your home as security for money that funds a different property, some lenders structure that arrangement as cross-collateralisation: a lending structure where two or more properties — here, your home and the new investment property — are used together as combined security for one loan or a group of linked loans, rather than each property standing behind its own separate, stand-alone loan.
The practical effect is that a lender’s security position can span both properties at once. That can make it harder to sell, discharge, or refinance either property on its own later, without the lender first reviewing the remaining linked debt and security across both — and it narrows the separation between your home and the investment. Some borrowers instead ask their broker or lender about a stand-alone structure — for example, using two distinct facilities, or even two different lenders — specifically to keep the home’s security separate from the investment property’s. Whether cross-collateralised or stand-alone borrowing suits your situation is a question for a broker or your lender, not a rule either way; no consumer regulator publishes a single definition or a universal recommendation on this, so treat any claim that one structure is always better as a simplification.
What are the risks of using your home this way?
The core risk is straightforward: your home, not just the new property, is the security behind this borrowing.
- Your home is exposed, not only the investment. If repayments on either the equity portion or the new investment loan fall behind, the lender’s security includes your home — the consequences of the new property underperforming aren’t contained to that property alone.
- Your equity buffer shrinks. Drawing down equity reduces the cushion you hold in your own home, which can matter if property values move against you or your circumstances change.
- Vacancy and rate rises compound across both loans. A rental shortfall, or a rise in variable rates, affects your combined ability to service the home loan, the equity portion, and the investment loan together — not just one in isolation.
- Cross-collateralisation can limit flexibility. As above, a linked security structure can make it harder to sell, refinance, or discharge one property without the lender reassessing both.
How the new property performs — whether its rental income and any capital growth cover its own costs over time — matters directly here, because a shortfall doesn’t stay contained to the investment property when your home sits behind the same borrowing. Our guide to cash-flow-positive versus negatively geared property works through that trade-off in more detail.
How does tax treatment interact with this financing choice?
Buying an investment property funded this way brings it inside the same tax framework as any other geared rental property — the source of the deposit doesn’t change that. Under current law (the 2026-27 income year), the ATO describes negative gearing as occurring “when you buy a rental property with the assistance of borrowed funds and the rental income is less than the deductible expenses (including interest on the borrowings)” — the result is a net rental loss, which you can generally claim in full against your other income, or carry forward if your other income isn’t enough to absorb it.
That current-law position is genuinely different from what applies from the 2027-28 income year. Under changes enacted in June 2026, a new provision will generally quarantine residential rental losses so they can no longer offset other income — they’ll instead only reduce residential capital gains or carry forward against future residential rental income. That change is grandfathered for interests acquired before 7:30pm AEST on 12 May 2026, and new residential dwellings are intended to be excluded from the quarantine — but exactly what counts as “new” for this purpose hasn’t yet been published, so that boundary can’t be stated here. Our guide to capital gains tax on investment property covers the wider 2027 reform in more detail, current as at July 2026.
One structuring detail can be answered directly rather than left open: whether interest on the equity you draw down is deductible follows how the borrowed money is actually used, not what secures the loan — and the ATO’s guidance on interest expenses (drawing on Taxation Ruling TR 2000/2, which covers line-of-credit and redraw facilities) addresses this exact scenario with a worked example: a borrower redraws funds from their home loan to pay the deposit on a rental property, and the ATO confirms the interest on that redrawn amount is deductible because the funds were used to buy an income-producing property — including where an investment loan advance later repays part of that redraw. The practical catch is record-keeping, not the underlying rule: once a loan account mixes private funds (your home) with investment funds (the redrawn deposit), you must keep accurate records separating the two, apportion interest between the private and rental portions, and you can’t direct extra repayments at only the private part — the ATO’s guidance is explicit that all loan repayments are apportioned across both portions for the life of the loan. A facility with clearly separated sub-accounts, or a genuinely separate equity loan, avoids this apportionment work; redrawing within a single blended account doesn’t remove the deduction, but it does add a tracing obligation you’ll need to maintain for as long as the loan runs.
Tax outcomes depend on your circumstances — speak with a registered tax agent before acting.
Where does this leave you?
Using equity in your home as a deposit for an investment property is a genuinely common and available route — but “available” and “right for your situation” are different questions. The factors worth working through with a mortgage broker or your lender are how much usable equity a bank valuation actually supports, whether the borrowing structure is cross-collateralised or kept stand-alone, and whether your income comfortably services all three debts under the buffers a lender will apply — not just the two you started with. The tax and legal consequences of gearing a property this way are a separate conversation, best had with a registered tax agent before you commit.
If tying up your home as security for a second loan doesn’t suit your situation, it isn’t the only way into property investment. Some investors instead look at buying a fractional interest in a single property rather than borrowing against their own home to buy a whole one outright — our guide to what fractional property investment is explains how that model works.
