March 23, 2025 by Kelly Carter
Using home equity to purchase an
investment property
Case Study: By tapping into their family home’s equity, Kieran and Amelia
purchased an investment property to generate wealth for their
future. Kieran and Amelia are a couple in their late forties with two teenage children. Eight years ago they bought their four-bedroom family home on the Central Coast, about an hour north of Sydney, for $575,000. After checking comparable sales in the area and asking their Mortgage Choice broker for a free PropTrack property report, Kieran and Amelia estimate that their house is currently worth $980,000. Because their home has appreciated in value, Kieran and Amelia are keen to use some of their home equity to purchase an investment property.
Understanding your available equity
Kieran and Amelia’s mortgage balance is currently $360,000 and the home is worth $980,000. Therefore they have $424,000 in accessible equity in their family home. This is calculated as 80% of $980,000 (the current value of their home) minus the $360,000 still owing on their mortgage.
Why 80%?
When looking to purchase a property using equity, lenders will generally allow you to borrow up to 80% of your property's value. While it may be possible in some circumstances to go above the 80% mark, keep in mind that you will likely be charged Lender's Mortgage Insurance (LMI) - even if you
paid LMI when you took out your original mortgage.
Finding the right investment property
To find the right investment property, start by setting clear financial goals—capital growth, rental yield, or both. Research high-demand locations with strong growth potential, low vacancy rates, and solid infrastructure. Analyze comparable sales and rental yields to ensure profitability. Factor in costs like maintenance, property management, and interest rates. Look for properties with value-adding potential, such as renovation opportunities. The great thing about buying an investment property is the ability to buy anywhere in Australia, remember you are not living in the property. If you are daunted by the process of buying outside of your residential area, you can enlist the services of a buyers agent.
Get in touch
If you’re considering accessing your home’s equity to purchase an investment property, please get in touch with Kelly and book in a discovery call.
