If you’ve owned your home for a few years, there’s a good chance you’ve built up a little something called equity, and it might just be the most powerful (and overlooked) tool for growing your wealth.
While rising property prices and cost-of-living pressures make saving for a second deposit feel impossible, the good news is you might not need one.
By tapping into your existing equity, you can take your next big step, buying an investment property, without starting from scratch.
Let’s break down how it works, how to know if it’s right for you, and how some savvy homeowners are already using this strategy to build long-term financial freedom.
First, what exactly is equity?
Equity is simply the difference between what your home is worth and how much you still owe on it.
For example:
- Your home is valued at $800,000
- You owe $500,000 on your mortgage
- That gives you $300,000 in equity
But not all of that is accessible. Most lenders will let you borrow up to 80% of your home’s value without needing Lenders Mortgage Insurance (LMI). That’s your usable equity, the part you can actually unlock.
So in this example:
- 80% of $800,000 = $640,000
- $640,000 – $500,000 loan = $140,000 in usable equity
That $140,000 could become your deposit for a second property. Magic, right?
How do you access that equity?
There are a couple of main ways to tap into your equity:
- Refinance your loan
This means replacing your current mortgage with a new one (often with a different lender) that allows you to borrow against your increased equity and potentially snag a better interest rate while you’re at it.
- Apply for a loan top-up
If your current lender allows it, you might be able to increase your existing loan to access your equity without starting from scratch.
Either way, that released equity can be used as a deposit for your investment property, meaning no need to save tens of thousands in cash all over again.
Why use equity instead of saving a new deposit?
- It’s faster. Saving another deposit while paying off a mortgage, groceries, petrol, and life in general? No, thanks.
- It’s strategic. You’re using existing value you’ve already built and letting it work harder for you.
- You still own your home. You’re not selling or downsizing; you’re building on top of your first big win.
- It opens doors. With rental demand high, your new property could start generating income straight away.
Example: Meet Lisa & Tom
Lisa and Tom bought their home in 2019 for $600,000. Fast forward to 2025, their property is now valued at $850,000, and they’ve paid their loan down to $500,000.
Their usable equity? Around $180,000.
After a quick refinance, they unlocked $120,000—enough for a 20% deposit and stamp duty on a $600,000 investment unit in a fast-growing suburb.
They rented it out immediately and are now building wealth through two properties, all without needing to save another cent.
What to watch out for
Using equity is powerful, but it’s not a one-size-fits-all solution. Here are a few things to keep in mind:
- You’re increasing your total debt, so make sure your budget can handle the new repayments
- Interest rates for investment loans are usually higher than owner-occupied loans
- Rental income isn’t always guaranteed; factor in vacancies and maintenance
- Not all lenders calculate usable equity the same way; it pays to get expert advice
How to know if you’re ready
If you’ve been in your home for a few years, made extra repayments, or seen your property value rise, it’s worth finding out how much equity you could access. You might be closer to buying an investment property than you think.
A good broker (that’s us!) can help:
- Get a professional property valuation
- Crunch the numbers on your usable equity
- Compare lenders and investment loan options
- Make sure your investment plan aligns with your goals
You worked hard to buy your home; now let it work for you. Whether your goal is to build passive income, grow a property portfolio, or simply create a more secure future, equity could be your key to unlocking that next step.
You don’t need a second deposit. You don’t need to wait another five years. You just need a plan.
Want to find out how much equity you can use?
Let’s talk. We’ll help you assess your position, understand your options, and make confident, informed moves into the world of property investment, even if you’re starting from just one home.
*This blog is intended for general informational purposes only. For personalised advice tailored to your unique financial situation, please contact NMC Finance.
