Using Equity to Buy a Second House | Smart Strategy

How home equity works for second purchases

Using your home’s equity is a common way for Australians to buy a second property. Equity is the gap between your property’s current value and what you still owe on the mortgage. Most lenders allow borrowing up to a set percentage of that value without extra insurance, through either refinancing your loan or setting up a separate equity facility.

Understanding LVR: Your total debt (existing mortgage + new equity loan) must stay within the lender’s maximum Loan-to-Value Ratio (usually 80%).

Two common strategies:

• Increase current mortgage: Refinance for a higher amount and take the difference as cash.

• Separate security: Create a new loan (e.g., split or line of credit) secured by home equity.

Using equity as security typically means lower interest rates than personal loans. HeyNest connects you with an independent broker who assesses your equity position and structures the right finance for your second home.

Simple, Smart, Chill.
That's Heynest

Skip the paperwork. Connect with your broker online in minutes.

Digital & Fast

Your Perfect Match

We link you with the expert who understands your goals.

Tailored Options

Access the best mortgage deals, hassle-free.

Steps to access equity for your new home

Accessing home equity to buy another property requires a clear, structured process. It’s not just about having equity, it must be made usable for the lender.

• Valuation: Get an updated property valuation to confirm available equity.

• Assessment: The lender reviews income, debts, and credit to ensure you can service both loans.

• Application: Submit your equity release request and explain how funds will be used. Funds are usually released before settlement.

• Due diligence: Include stamp duty, valuation and government fees in your budget.

Key considerations:

• Serviceability: Lenders assess your capacity to manage both loans, factoring in any rental income.

• Tax Implications: If the second property is an investment, interest on the equity loan may be tax-deductible, seek professional advice.

A HeyNest broker understands lender policies and can package your application for fast approval and competitive rates, ensuring your equity works efficiently for your next purchase.

Stop Stressing: Why a Broker is the 'Smart, Chill' Way

HeyNest

Traditional Bank

Access to many lenders

Compares and negotiates the best market rates for you.

Dedicated, personalized guide every step of the way.

Only offers their own limited products.

Standard, often non-negotiable in-house rates.

Standardized service; often no single dedicated contact.

Choosing the right loan structure for a second house

Selecting the right loan structure is crucial when using equity, influencing interest costs and tax outcomes. The best choice depends on whether the second property is for investment or personal use.

Common options:

• P&I vs. interest-only: Investors often use Interest-Only loans for cash flow and tax benefits; owner-occupiers typically choose P&I.

• Variable vs. fixed rates: Fixed offers repayment certainty, while variable allows flexibility (extra repayments, offsets).

• Offset accounts: Useful for investment loans to reduce interest while keeping funds accessible.

Structural goals:

• Minimize non-deductible debt: Separate investment debt (potentially deductible) from your home loan.

• Optimize repayments: Align structure with income, cash flow and tax efficiency.

HeyNest connects you with expert brokers nationwide who specialize in investment lending and complex structures, offering impartial advice and comparing lenders to tailor finance to your long-term wealth goals.

Simple
Smart
Chill
Heynest

Frequently asked questions

Can I use 100% of my available equity?

No, lenders typically limit the total borrowing to 80% (or less) of the property's value to maintain a buffer and avoid LMI.

Do I have to sell my first house to buy a second one?

No, if you have sufficient equity and income (serviceability) you can use the equity from your first home to finance the purchase of the second without selling.

What is the minimum equity I need to buy a second house?

There is no minimum, but you generally need enough accessible equity (the difference between the 80% LVR and your current loan balance) to cover the 20% deposit, stamp duty and other purchase costs for the new property.