Using equity to buy an investment property in Perth
By Nathan Ellis · Updated 2026-07-15
Using equity to buy an investment property means borrowing against the value you have built up in your home to pay the deposit and costs on a second property, instead of saving cash. Most lenders let you borrow up to 80% of your home’s value without lenders mortgage insurance, so your usable equity is 80% of the home’s value minus what you still owe.
On a Perth home worth $700,000 with a $400,000 loan, usable equity is $160,000. That is enough for a 20% deposit on a $600,000 investment property, plus WA transfer duty and Landgate fees. The catch is that you then carry 2 loans, and the lender must be satisfied you can repay both.
How to work out your usable equity
Usable equity is the part of your home’s equity a lender will let you borrow against. The calculation has 3 steps:
- Get a valuation of your home from the lender, not an online estimate.
- Multiply the value by 80%, the usual limit before lenders mortgage insurance applies.
- Subtract your current loan balance.
| Amount | |
|---|---|
| Home value (lender’s valuation) | $700,000 |
| 80% of the value | $560,000 |
| Current loan | $400,000 |
| Usable equity | $160,000 |
Your total equity here is $300,000, but only $160,000 is usable without lenders mortgage insurance. Equity grows as you repay the loan and as the home rises in value, and a lender’s valuation can come in below an online estimate. A loan to value ratio above 80% is possible with some lenders, but it usually brings insurance and a higher cost.
How much deposit you need for an investment property
Most lenders ask for a 20% deposit on an investment property to avoid lenders mortgage insurance, plus enough to cover purchase costs. In WA, an investor pays transfer duty at the general rate, because the first home owner concession does not apply.
Here is what a $600,000 investment property in Perth needs up front, calculated by Compare A Broker:
| Item | Amount |
|---|---|
| 20% deposit | $120,000 |
| Transfer duty (general rate) | $22,515 |
| Landgate transfer fee | $335.10 |
| Landgate mortgage registration | $225.10 |
| Total from equity | $143,075.20 |
| Investment loan (80% of the price) | $480,000 |
Duty and fees are from RevenueWA’s rate table and Landgate’s fee schedule. Settlement agent, inspection and lender fees come on top. Our guide to the costs of buying a house in WA lists them.
The $160,000 of usable equity covers the $143,075.20, leaving about $16,900 as a buffer. In total, you take on $623,075.20 of new borrowing: $480,000 against the investment property and $143,075.20 against your home.
Ways to access the equity in your home
There are 3 common ways to access your home equity for an investment property:
- A loan increase or top-up. Your lender increases your existing home loan, often as a separate split.
- A separate split loan. A new loan account secured by your home, used only for the investment deposit and costs. This keeps the investment borrowing easy to track.
- A line of credit. A revolving facility secured by your home that you draw on as needed. Interest rates and discipline are the catch.
You can also refinance to another lender that offers a better rate or structure. Our guide on whether refinancing is worth it covers the costs.
Serviceability: can you repay both loans?
Equity gets you the deposit on an investment property, but serviceability decides whether you get the loan. The lender assesses whether your income can cover both loans, your other debts and your living costs, and it adds a buffer. APRA expects banks and other authorised deposit-taking institutions to assess new borrowers at an interest rate at least 3 percentage points above the loan’s actual rate. On 28 May 2026 APRA confirmed the buffer stays at 3 percentage points. Non-bank lenders are not bound by APRA’s expectation, so ask any lender what rate it assesses you at (APRA).
On the $623,075.20 of new borrowing above, calculated by Compare A Broker over 30 years:
| Rate | Principal and interest | Interest only |
|---|---|---|
| 6.5% (illustrative actual rate) | $3,938.26 a month | $3,374.99 a month |
| 9.5% (with the 3-point buffer) | $5,239.15 a month | $4,932.68 a month |
Lenders also count rental income, but usually only part of it, to allow for vacancies and costs. Moneysmart suggests working out what your repayments would be if interest rates rose by 2%.
Interest only or principal and interest
An investment loan can be interest only for a set period or principal and interest from the start. Interest only lowers repayments in the short term, but the balance does not fall, and you pay more interest over the life of the loan. When the interest-only period ends, repayments rise because the remaining term is shorter. Our glossary covers principal and interest vs interest only.
Cross-collateralisation vs standalone loans
Cross-collateralisation means 1 lender takes 2 or more properties, such as your home and the investment property, as security for your loans. It can make approval simpler, but it ties the properties together. Selling or refinancing 1 of them can mean the lender revalues both and decides how much of the sale proceeds to keep.
A standalone structure keeps each loan secured by its own property: the investment loan against the investment property, and the equity split against your home. Standalone loans give you more flexibility, because each property can be sold or refinanced on its own. Ask your broker or lender which structure they are proposing, in writing.
Tax: the purpose of the loan decides the deduction
For tax, what counts is how the borrowed money is used, not which property secures it. The ATO says you can claim interest on the money you use to buy a rental property. You cannot claim interest on a loan used to buy a home you live in, even if a rental property secures it (ATO).
That is why a separate split for the investment borrowing matters. Many investors also expect negative gearing, where rental losses reduce taxable income. Tax rules can change and depend on your situation, so treat any tax benefit as a question for your accountant, not a given. If 1 loan account mixes private and rental spending, the ATO requires you to apportion the interest for the life of the loan. Get tax advice before you set up the structure.
Risks of using equity to invest
Using equity to buy an investment property increases your debt and puts your home on the line:
- If you cannot keep up repayments, the lender can sell the property used as security, which may include your home.
- If property values fall, you could owe more than the properties are worth.
- Rate rises lift repayments on both loans at once.
- Vacancies and repairs reduce the rent you counted on.
- Ongoing costs such as council and water rates, insurance, strata levies and property management come out of the rent.
How a broker fits in
276 businesses are listed in our investment property finance directory. A broker can compare investor rates and policies across lenders, including how much rent each lender counts and whether it will set up standalone security. Check the broker’s credit licence before you share documents, and get tax advice from an accountant.
Checked against APRA, the ATO, RevenueWA, Landgate and lender pages on 26 September 2026. This is general information, not financial, tax or legal advice. It does not consider your objectives, financial situation or needs.
Frequently asked questions
How do I use equity to buy a property?
Get your home valued, work out your usable equity (80% of the value minus your loan), then borrow against it to cover the deposit and costs on the investment property. The lender must also be satisfied you can repay both loans, assessed at a rate 3 percentage points above the actual rate.
How much equity do I need to invest?
Enough to cover a 20% deposit plus purchase costs, if you want to avoid lenders mortgage insurance. For a $600,000 investment property in Perth, that is about $143,075 including WA transfer duty of $22,515 at the general rate and Landgate fees.
What is usable equity?
Usable equity is 80% of your property’s value minus your loan balance. On a $700,000 home with a $400,000 loan, usable equity is $160,000.
Is interest on equity for investing tax deductible?
Generally yes, if the borrowed money is used to buy a property that is rented or held to earn rent. The ATO looks at how the money is used, not which property secures the loan. Keep the investment borrowing in a separate loan split.
What is cross-collateralisation?
Cross-collateralisation is when 1 lender uses 2 or more properties as security for your loans. It can simplify approval, but selling or refinancing 1 property can mean the lender revalues both and keeps more of the sale proceeds.
Is releasing equity to buy property a good idea?
Releasing equity to buy an investment property can be a good idea if you can service both loans with a buffer and keep a cash reserve. The numbers should still work if rates rise or the property is vacant. It also puts your home on the line, so compare the risk before you commit.
Frequently asked questions
- Can I use equity in my current home instead of a cash deposit?
- Often yes, if you have enough equity built up. A lender assesses the usable equity in your existing property and can structure a loan that draws on it as part or all of your deposit for the investment purchase.
- How does rental income affect my borrowing power?
- Lenders typically count a percentage of expected rental income toward your serviceability, rather than the full amount, to allow for vacancies and costs. Your broker or lender can give you a specific figure for a given property.
- Should I choose interest-only or principal and interest for an investment loan?
- It depends on your strategy. Interest-only can free up cash flow in the short term, while principal and interest builds equity faster and usually costs less over the life of the loan. There's no single right answer, it depends on what you're optimising for.
- Do I need a bigger deposit for an investment property?
- Often, lenders require a similar or slightly larger deposit for investment loans compared with owner-occupier loans, and investment loans can carry a slightly higher rate. Confirm current requirements with a broker before assuming a figure.