Equity is the difference between what your property is worth and what you owe on it. It is the most powerful tool available to Australian property investors for growing a portfolio without needing to save a fresh deposit every time.
How Is Equity Calculated?
Equity = Current market value of the property minus the outstanding loan balance. If your property is worth $900,000 and you owe $500,000, you have $400,000 in equity.
What Is Usable Equity?
Not all equity is accessible. Lenders will typically lend up to 80% of the property’s current value without requiring Lenders Mortgage Insurance. Usable equity is therefore 80% of the value minus the outstanding loan.
Example: Property worth $900,000. 80% of $900,000 = $720,000. Outstanding loan = $500,000. Usable equity = $720,000 minus $500,000 = $220,000.
How Much Equity Do I Need to Buy the Next Property?
| Next Property Price | Deposit Required (20%) | Plus Buying Costs (~5%) | Total Equity Needed |
|---|---|---|---|
| $600,000 | $120,000 | $30,000 | $150,000 |
| $750,000 | $150,000 | $37,500 | $187,500 |
| $900,000 | $180,000 | $45,000 | $225,000 |
| $1,100,000 | $220,000 | $55,000 | $275,000 |
How Do I Access Equity?
- Refinance: Apply to your existing lender or a new lender to increase your loan to 80% of the current value. The extra funds are released as cash or a line of credit to use as a deposit.
- Equity loan (line of credit): A separate loan secured against your property, drawn down only when needed. Interest is charged only on what you use.
- Cross-collateralisation: Using your existing property as additional security for the new loan. This gives more flexibility but reduces your negotiating power when selling either property.
GeeVee Verdict
Using equity to fund your next property purchase is the most capital-efficient way to grow a portfolio. The key is buying properties that grow in value fast enough to replenish usable equity within 5 to 7 years, keeping the cycle going. Focus on inner-city and inner-ring suburbs with proven long-term capital growth — not high-yield regional properties where growth may not rebuild equity quickly enough.
Frequently Asked Questions
Can I access equity without refinancing?
Yes — through a home equity loan (a second mortgage) secured against your property. The existing loan stays in place and a new loan is added on top. This can be quicker than a full refinance but may come at a higher interest rate.
Does using equity increase my risk?
Yes. You are adding debt against your property. If property values fall, your LVR rises and your usable equity shrinks. Always stress-test your repayments at a rate 2% to 3% above your current rate before accessing equity for a new purchase.
How long does it take to access equity through refinancing?
A standard refinance takes 3 to 6 weeks from application to settlement. If you have a clean credit file, stable income and sufficient equity, approvals can be faster.
Whether you’re buying your first investment property, building a portfolio, or exploring SMSF property investment, the Collings Property Platform gives you access to off-market opportunities, portfolio tracking, investment tools, and property insights powered by GeeVee AI. Join free today and start building your property future. collings.com.au/portal
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