Property Purchase
Using Equity To Buy Property Explained
5 min read- Finance Guide
- Updated 2026
Quick answer
Usable equity may help fund your next purchase
80% LVR guide
Many lenders use up to 80% of value when assessing accessible equity
- Max loan term Up to 30 years
- Accessible equity Depends on value, debt and policy
- Common use Deposit, costs or full purchase support
- Key limit Servicing must still work
1300 421 044
1300 421 044
Detailed explanation
Equity is the difference between what a property is worth and what is still owed against it. Not all of that equity is automatically available to borrow. In practice, lenders often assess accessible equity by taking a percentage of the property value, commonly up to 80 percent, and then subtracting the current loan balance. That available amount may then be used to support a deposit, cover purchase costs, or help secure another property loan if your servicing position is strong enough.
Core parts of a property loan
Usable equity
The portion of equity a lender may allow you to access after applying its LVR limit
Existing property value
A current valuation or lender estimate helps determine how much equity may be available
Current loan balance
The debt already secured against the property reduces the equity you can use
Top up or separate loan
Equity may be released by increasing an existing loan or setting up a separate split
Servicing capacity
Lenders still test whether you can afford the extra repayments on all linked debts
Structure risk
Cross collateralisation and overborrowing can create unnecessary complexity and risk
How equity is usually
calculated
-
Equity is the property value minus the debt secured against it
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Usable equity is usually less than total equity because lenders apply a maximum LVR
-
Example: a $900,000 property at 80% LVR supports $720,000 total lending
-
If the current loan is $500,000, the accessible equity may be about $220,000 before costs
-
The final figure depends on valuation, lender policy, and your ability to service the extra debt
What lenders assess before releasing equity
-
Income from employment, business, rent or other acceptable sources
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All existing debts, including the current home loan and any investment loans
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Living expenses, dependants and overall household position
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The condition, location and marketability of the existing property
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The purpose of the extra borrowing and the strength of the new purchase
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Serviceability at a rate buffer above the actual loan rate, as required by APRA settings
Equity access zones
-
Strong usable equity Often easier to structure without pushing leverage too high
More flexibility -
Tight equity position May still work, but options narrow and policy gets tighter
Closer review -
Overstretched structure Borrowing too aggressively can create repayment stress and limited options
Higher risk
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How equity is commonly used in a purchase structure
A typical equity backed purchase often works like this:
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01. Existing property is reviewed and a value estimate or valuation is obtained
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02. The current debt secured against that property is confirmed
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03. The lender works out how much usable equity may be available at its policy LVR
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04. Borrowing capacity is checked to see if the extra debt is affordable
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05. The equity release is structured as a top up, split, or separate loan
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06. The released funds may be used for deposit and purchase costs on the next property
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07. A second loan may then be secured against the new property for the balance of the purchase
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08. Both loans are settled and repayments begin under the agreed structure
Common Problems
Using equity can work well, but problems arise when borrowers overestimate how much is available, ignore servicing limits, or tie properties together in an inflexible way.
Accessible equity is lower than expected
A desktop estimate may suggest strong equity, but the lender valuation can come in lower or policy may cap the usable amount.
Possible solutions include:
- Obtain a realistic valuation early
- Use a conservative LVR assumption when planning
- Keep some cash buffer rather than relying on maximum leverage
- Review several lenders if one policy is too restrictive
Repayments become too heavy
Even with strong equity, the extra debt still has to be serviced alongside your existing mortgage and other commitments.
Possible solutions include:
- Reduce unsecured debts before applying
- Use only part of the available equity
- Consider a cheaper target property or larger cash contribution
- Review whether interest only or principal and interest best suits the strategy
Cross collateralisation creates complexity
Some lenders may tie both properties together under one structure, which can make future sales, refinancing or equity releases harder.
Possible solutions include:
- Ask whether separate securities can be used instead
- Keep the existing and new loans clearly structured
- Understand discharge and refinance implications before signing
- Avoid overcomplicating the deal unless it delivers a clear benefit
Steps To Get Finance
Step
01
Review the equity position in your existing property and estimate what may be accessible.
Step
02
Confirm how much extra debt the household can service and which structure suits the purchase.
Step
03
Obtain lender feedback on the equity release and the new purchase before committing.
Step
04
Submit the equity release and purchase application with supporting documents.
Step
05
Complete valuations on the existing and new property if required.
Step
06
Settle both facilities and manage the debt under a clear repayment plan.
Speak With A Property Equity Specialist
Using equity to buy property can vary significantly depending on existing debt levels, property values, lender policy, and the structure of the next purchase.
A specialist can review the available equity and help identify which loan structures may suit the purchase strategy.
Speak with a finance specialist about using equity for your next property purchase.
Submit the short form below and a property finance specialist will review your current position and discuss possible equity based funding options.
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