Property Purchase Loans
Can You Use Equity To Buy Property?
5 min read- Finance Guide
- Updated 2026
Quick answer
Usable equity is often worked out to
80% of value
Less the current loan balance and subject to servicing
- Common usable equity cap Up to 80%
- Typical access methods Top up or refinance
- Main lender test Serviceability
1300 421 044
1300 421 044
Detailed explained
Using equity to buy property means borrowing against the value you have built up in an existing property. Equity is the gap between the current property value and the amount still owing on the loan. In practice, lenders usually focus on usable equity rather than total equity, because they still want the overall loan to remain within an acceptable loan to value ratio and they still need to see that you can comfortably afford the repayments.
How equity is commonly structured
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Equity can often replace some or all of the cash deposit you would otherwise need to contribute from savings
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Lenders may let you access equity by increasing your current loan, refinancing to a new lender, or setting up a separate loan split secured by your existing property
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Keeping the overall lending at or below 80 percent of the existing property value can help avoid lenders mortgage insurance on that security property
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Even where equity is available, the lender still checks borrowing capacity, credit history, living costs, and the suitability of the property being purchased
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LVR SNAPSHOT
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Lender funds
up to 80%
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Your deposit
from 20%
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Above 80% LVR
Lenders mortgage insurance (LMI) may apply
How using equity usually works
Purchase
01
The lender assesses the current market value of your existing property to work out how much usable equity may be available
Equity Access
02
You may access the equity through a top up, refinance, or separate split loan linked to the existing property
Purchase
03
The released funds can be used toward the deposit and purchase costs on the new property, subject to lender approval
Approval
04
Formal approval depends on serviceability, the existing and new securities, and whether the overall structure fits lender policy
What lenders look at
Current property value
The lender usually needs a valuation or acceptable estimate of the existing property before releasing equity
Existing debts
All current liabilities matter, including the home loan already secured against the property and any other credit commitments
Serviceability
Strong equity does not replace income assessment. Lenders still test whether you can afford the extra debt
Usable equity position
Many lenders start with up to 80 percent of the property value, then subtract the existing loan balance to estimate usable equity
Credit conduct and repayment history
Repayment history still matters because equity alone does not offset weak credit conduct
New property details
The property you are buying must also meet policy because the lender may take security over one or both properties depending on the structure
Debt to income policy matters
From 1 February 2026, APRA requires authorised deposit taking institutions to limit new residential mortgage lending at debt to income ratios of 6 times income or more to 20 percent of new lending
Need Help with your Project?
From equity release to settlement
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01. The lender confirms the available equity and issues approval for the chosen structure
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02. If equity is being released by refinance, new loan documents are signed and the funds are prepared for use
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03. Once the purchase proceeds, your solicitor or conveyancer coordinates with the lender for the new property settlement
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04. The final structure may involve separate loans, one cross secured loan, or a mix of both depending on lender policy and the strategy chosen
Common problems
Using equity can be effective, but problems often appear when borrowers overestimate how much they can access, rely on old property values, or assume equity automatically means approval. Lenders still look at the whole position.
Not enough usable equity
Total equity and usable equity are not the same. A borrower may have substantial paper equity but only a modest amount available once lender limits are applied.
Possible solutions include:
Order a valuation or realistic estimate early- Reduce the purchase budget if needed
- Add cash savings to support the deal
- Consider another lender structure where appropriate
Serviceability issues
Borrowers sometimes assume equity is enough on its own, but income and affordability testing still apply to the extra debt.
Possible solutions include:
- Reduce unsecured debts and credit card limits
- Provide strong income evidence and up to date statements
- Lower the overall borrowing amount
- Choose a structure that fits the actual cash flow
Security structure issues
Some borrowers want one lender across both properties, while others prefer separate securities. Not every lender treats cross security, split loans, or cash out the same way.
Possible solutions include:
- Clarify whether the lender will require one or both properties as security
- Use separate splits where practical for cleaner loan management
- Confirm the lender policy on cash out and property type early
- Review the structure carefully before signing documents
Steps to use equity for a purchase
Step
01
Estimate the current value of your existing property and the balance still owing.
Step
02
Work out the likely usable equity and how much extra debt your income can support.
Step
03
Decide whether a top up, refinance, split loan, or another structure suits the purchase.
Step
04
Submit the application with statements, income evidence, and property details.
Step
05
Complete the valuation, formal approval, and any cash out or equity release documents.
Step
06
Use the approved funds toward the new purchase and proceed to settlement.
Speak with a Property Finance Specialist
Using equity can be simple in the right situation, but the best structure depends on the value of your existing property, the debt already secured against it, your income, and the type of property you want to buy.
A specialist can review the equity position, explain the likely loan structure, and identify which lenders may suit the transaction.
Speak with a finance specialist about using equity to buy property
Submit the short form below and a property finance specialist will review your existing equity position and discuss possible funding options.
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