How do investors use equity to buy a second property?
Many investors assume buying another property means saving a full deposit again.
In reality, the deposit may already exist inside their current property.
This is called equity.
Understanding how equity works is often the moment investors realise their first property is not the finish line. It is the starting point.
What is property equity?
Equity is the difference between your property’s value and the remaining loan balance.
For example:
Property value: $800,000
Loan balance: $500,000
Total equity: $300,000
Lenders typically allow access to a portion of this equity, often up to 80 percent of the property’s value.
This accessible equity can potentially be used toward the deposit and costs for another investment property.
How equity is used to fund another property
Instead of saving a new deposit, investors may use available equity to help cover:
- Deposit
- Stamp duty
- Purchasing costs
This can allow investors to move forward sooner than relying on savings alone.
Over time, many investors repeat this process as property values grow and loans reduce, gradually building a portfolio.
Does borrowing capacity still matter?
Yes.
Even with available equity, lenders still assess whether a borrower can service the new loan.
They typically review:
- Income
- Living expenses
- Existing loan commitments
- Rental income
Equity may help fund the purchase, but borrowing capacity determines whether it can proceed.
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