How to Buy a Second Property Using Your Home Equity

<p class="text-sm text-muted-foreground mb-8"><strong>By Will Kiln</strong> | Published March 2026 | Last Updated March 2026</p> <p>If you own a home and have been paying down your mortgage — or if your property has grown in value — you may have a powerful asset sitting in your home that you haven't fully considered: equity.</p> <p>Equity is the difference between your property's current market value and the amount you still owe on your mortgage. For many Australians, it represents the most realistic pathway into property investment without needing to save a fresh deposit from scratch.</p> <h2>How to calculate your useable equity</h2> <p>Lenders will generally allow you to borrow up to 80% of your property's current value without requiring LMI. The gap between 80% of your property value and what you currently owe is your useable equity.</p> <p><strong>Useable equity = (Current property value × 80%) - Current loan balance</strong></p> <h2>How lenders assess your borrowing capacity for a second property</h2> <p><strong>Debt-to-income (DTI) ratio:</strong> As of February 2026, APRA requires lenders to cap the share of their new mortgage lending at a DTI ratio of 6 or higher to no more than 20%. This is a portfolio-level limit on the lender — it doesn't mean individual borrowers with a DTI above 6 are automatically declined. However, it means lenders have less room to approve high-DTI loans, and borrowers closer to or above that threshold may face stricter scrutiny or find fewer lenders willing to proceed.</p> <h2>Structuring your lending correctly</h2> <p><strong>Keep the loans separate.</strong> The cardinal rule is to establish a separate loan for the investment property, distinct from your owner-occupied loan. Never increase your existing home loan to cover the investment property deposit.</p> <p><strong>Offset accounts:</strong> If you have surplus cash, it should generally sit in an offset account attached to your <strong>owner-occupied</strong> loan, not your investment loan.</p> <h2>A worked example</h2> <p>David and Emma have a home worth $1,100,000 with a $650,000 loan balance and household income of $200,000. They want to buy a $750,000 investment property in Brisbane.</p> <p>Their useable equity is $230,000. With a DTI of 7.1, this is above the 6x threshold that APRA monitors at a portfolio level. While this doesn't automatically disqualify them, some lenders may have limited capacity for high-DTI loans in a given quarter. A broker can identify which lenders currently have capacity for high-DTI borrowers and the strongest appetite for well-qualified applicants.</p> <h2>Next steps</h2> <p>The first step is understanding how much useable equity you have and what it could fund. A free assessment can give you a clear picture in less than 30 minutes.</p> <p class="mt-8"><a href="/contact" class="inline-flex items-center gap-2 border-2 border-secondary bg-secondary/10 px-6 py-3 font-semibold text-secondary transition-all hover:bg-secondary hover:text-primary">Calculate Your Useable Equity — Free Assessment →</a></p> <hr class="my-12" /> <p class="text-xs text-muted-foreground">This article provides general information only and does not constitute personal financial or tax advice. Lending criteria, interest rates, and property values change regularly. Consult your broker and accountant before making investment decisions.</p> <p class="text-xs text-muted-foreground">Cumulus Capital Pty Ltd (ABN 16 695 377 229), Credit Representative Number 577081, is authorised under Australian Credit Licence Number 389328.</p>

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