How to Buy an Investment Property Using Your Home’s Equity
Thinking about growing your investment portfolio but most of your wealth is tied up in your home? Good news: you may be able to leverage your property’s equity to secure an investment property. Let’s break it down.
Property investment is a hot topic right now. According to MLC’s Financial Freedom report, 21% of Australians aspire to own investment properties as a way to build wealth. That number jumps to 27% for Gen Zs and 23% for Gen Ys.
It’s not just talk—investors are actively entering the market. The Australian Bureau of Statistics reports that lending for investment properties has surged over 30% in the past year.
The appeal? Rents have skyrocketed 39.7% in the last five years, rental vacancy rates are sitting at a low 1.3%, and national home values have climbed 13.5% since January 2023.
How Property Price Gains Unlock Equity
With property prices rising, many homeowners are sitting on significant equity—without even realizing it.
CoreLogic’s latest Pain and Gain report shows property profits are at a 14-year high, with homes resold in early 2024 delivering a median profit of $265,000.
So, how do you tap into your home’s equity without selling?
Let’s say you bought a house for $750,000 five years ago. Thanks to market growth, it’s now valued at $1 million. If you originally took out a $600,000 home loan and have paid it down to $500,000, you now have $500,000 in equity.
By refinancing to a $700,000 loan (which is 70% of your home’s current market value), you could unlock $200,000 in usable equity—enough for a deposit on an investment property.
Banks typically allow borrowing up to 80% of a property’s value, meaning if you refinanced to an $800,000 loan, you could access up to $300,000 in equity.
This strategy allows you to become a property investor—earning rental income, potential capital gains, and possible tax benefits—without needing to dip into your savings.
Other Ways to Get Started in Property Investment
Equity isn’t the only path to becoming a property investor. Other options include:
Using cash savings for a deposit.
Keeping your current home as a rental while upgrading to your next home.
Exploring alternative investment opportunities, such as using your equity to invest in shares or boosting your super balance.
Let’s Make It Happen
Every financial situation is different, and it’s important to explore the right options for you. If you’d like to understand how to leverage your home’s equity to invest in property, give us a call today. Let’s turn your investment goals into reality.
Disclaimer: This article provides general information and should not be considered financial or tax advice. It does not take into account your personal circumstances. Always seek professional advice before making financial decisions. This content is protected by copyright laws and cannot be modified, reproduced, or republished without prior written consent.
