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How to Use Equity in an Investment Property
Propell Property
29 September 2026 • 7 min read
Propell Property
29 September 2026 • 7 min read
For those looking to pay off their mortgage early, retire with more than just a pension, and create income for holidays, education, and other life goals, building an investment property portfolio is one of the major ways to get there.
If you are looking to purchase or already own an investment property that will grow in value, you may be able to access equity you can actually put to work. The equity can often be unlocked and used three ways:
This guide covers how to access that equity, what each option really costs you, and the tax and risk traps involved.
And to discover what equity can really do for first-time investors, check out our full guide on using equity.
Equity is the difference between the current value of a property you own and the amount you still owe on its loan.
For example, if your property is worth $900,000 and your remaining loan balance is $450,000, you have $450,000 in total equity.
However, this does not mean the entire $450,000 is available to use. Lenders will generally allow you to borrow up to a certain percentage of your property’s value, subject to their lending criteria. This is called usable equity.
A common way to estimate your usable equity is:
Property value × 80% – current home loan balance
Using the example above:
This is only a guide. Your lender’s valuation, your financial position and your borrowing capacity will determine how much equity you can actually access.
Yes. In most cases, you can access the equity in an investment property, usually by refinancing the loan or adding a loan split against it.
As discussed above, equity is the difference between what your property is worth and what you still owe on it. If the property has climbed in value since purchase, or you have paid down a chunk of the loan, that gap is equity you may be able to borrow against.
There are two catches worth knowing, though:
Because usable equity isn't cash sitting in your property, you access it by applying to borrow additional money using your home as security.
You can refinance the existing loan to a higher amount, add a separate loan split or equity loan against the property, or set up a line of credit secured against it. Which one suits you depends on your current loan, your lender and what you plan to do with the money.
How you structure the release matters more than most people realise, too. For example, setting the released equity up as its own loan split keeps your borrowing clean and your tax records tidy, which becomes important the moment you use that money for anything.
One thing to be deliberate about is cross-collateralisation. This is where a lender ties your properties together as security for one another. This structure often limits your flexibility later when you’re selling one property or restructuring your lending, so structuring each loan deliberately from the start, aligned to your investment portfolio strategy, can save headaches down the track.
You can draw equity from your investment property to fund the deposit, or more, on a home you plan to live in.
For investors who have built strong equity but not much spare cash, this can bring a dream home purchase forward by years.
There is one important catch. Because the borrowed money is being used to buy your own home, the interest on it is generally NOT tax deductible, even though the loan is secured against an investment property.
Using equity as the deposit on your next investment is the classic portfolio-growth move. It lets you buy again without saving a new cash deposit, using the value you have already built instead.
Because the borrowed equity is used to purchase an income-producing asset, the interest is generally tax-deductible.
Some investors use equity, or the rental cash flow from their portfolio, to chip away at non-deductible debt such as their own home loan. Reducing the debt that is not working for you at tax time can be a smart use of a strong equity position.
Shifting debt around can help, but done the wrong way, it can also convert deductible debt into non-deductible debt.
Having tax, finance and property professionals on your team to develop and action a strategy here is extremely important.
Private school fees, a year of travel, helping an adult child through university. These are the reasons a lot of people start investing in the first place, and they are funded by rental income and growth over time rather than by pulling equity out to spend.
So remember, equity used to buy an income-producing asset builds the cash flow that can pay for those things later. Equity drawn to fund the spending directly is debt with a holiday attached, and the interest on it is not deductible.
The tax deductibility of borrowed money is determined by its purpose.
Therefore, equity used for investment is generally deductible, whereas equity used for a home to live in, a car, or a holiday is not. Getting this wrong can cost you thousands over the life of a loan.
That is why investors with multiple properties often use separate loan splits. Keeping your deductible and non-deductible borrowing apart makes tax time simpler, keeps you compliant, and gives your accountant a clean picture to work from. Mixing the two into one loan is a common mistake that investors could easily avoid.
For the current rules on investment-related deductions, the Australian Taxation Office guidance on investments and assets is the primary source to check, and it is worth confirming your own position with a registered tax professional.
Using equity is a genuine tool, but it is still borrowing.
The biggest risk is over-leveraging. A bigger loan means higher repayments and a thinner buffer if interest rates rise or a property sits vacant for a stretch.
The second is market risk. If property values fall, a heavily geared portfolio is more exposed than a conservative one.
The third is cross-collateralisation, which, as noted earlier, can limit your ability to sell or restructure when you need to.
These risks make it clear that accessing the equity of your investment property should be part of your overall investment portfolio strategy, as planned with your investment property strategist team, and not done so on impulse.
If you are ready to explore your options, here is the sequence that keeps you in control of the outcome:
At Propell Property, we help everyday Australians understand how equity can be useful and safely accessed when structured within their long-term investment strategy.
Working alongside your mortgage broker, we can help you establish a suitable investment budget, develop a clear property strategy and identify opportunities aligned with your financial position and long-term objectives.
For those yet to begin their property investment journey, our guide to equity is the best place to start. You may be closer to purchasing an investment property than you think.
To explore your options, call 1300 776 735 or contact the Propell Property team.