A line of credit (LOC) secured against your property equity gives you flexible, revolving access to funds up to an approved limit. For property investors, a LOC is commonly used to fund deposits, renovation costs or bridging finance between purchases. This guide covers exactly how LOCs work and when they are the right tool for investors.
How a Line of Credit Works
A LOC is secured against your property’s equity (typically up to 80% LVR). Once approved, you draw funds as needed up to the limit and only pay interest on the amount drawn. As you repay, funds become available again. Unlike a standard loan, there are no fixed repayments — you manage the balance.
Line of Credit vs Standard Equity Loan
| Feature | Line of Credit | Standard Equity Loan Split |
|---|---|---|
| Interest rate | Typically higher (0.2-0.5% above IO rate) | Same as IO loan rate |
| Repayment flexibility | Very high — revolving | Fixed monthly repayments |
| Tax clarity | Requires careful record-keeping | Clear — purpose-specific split |
| Best for | Active investors needing flexible draw-down | Single-purpose equity access |
Tax Implications of Using a Line of Credit
The ATO requires that interest on a LOC is only deductible for the portion used for income-producing purposes. If you draw from a LOC for both investment and personal purposes, you must apportion the interest accordingly. Keep detailed records of every draw and its purpose.
Frequently Asked Questions
Is a line of credit a good idea for property investors?
For active investors who need flexible access to equity across multiple purchases, yes. For passive investors making a single additional purchase, a standard equity loan split is simpler and carries less risk of tax contamination.
What LVR do I need for a line of credit?
Most lenders require your LVR to be below 80% after drawing the LOC. Some will approve up to 90% LVR with LMI. The available LOC limit is typically your equity above 80% LVR.
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