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Owning a home can unlock more than lifestyle security - it can become a powerful asset for growing your wealth. Many Australians are turning to their home equity to secure an investment property loan, taking advantage of increasing property values to access capital without selling existing assets.
Used strategically, equity can support the purchase of an income-generating property, help secure better investment property rates, and enable faster portfolio expansion. But with opportunity comes responsibility. Investors need to carefully weigh the benefits and risks before leveraging equity as a property investment financing strategy.
An investment property mortgage is tailored for borrowers purchasing real estate for income or capital growth - not to live in. These loans differ in structure and cost compared to a standard owner-occupier mortgage.
Key distinctions include:
For more detail, refer to our guide on the difference between home and investment loans, where we break down these structural and financial contrasts.
If you're considering using your equity, understanding your borrowing power under investment terms is crucial. Lenders assess your full financial profile - including income, expenses, credit history, and existing liabilities - alongside the potential rental income of the new property.
Explore: How much can I borrow for an investment property
When it comes to property investment financing, equity can be accessed in several ways:
Refinancing your current home loan is one of the most common ways to access equity for an investment property purchase. This involves replacing your existing mortgage with a new one - typically for a higher amount - allowing you to draw on the difference in available funds.
A key concept here is accessible equity. While you might technically own a significant portion of your property, lenders usually allow you to borrow up to 80% of your property’s value without triggering Lenders Mortgage Insurance (LMI). This threshold protects both you and the lender from overexposure to risk.
Let’s say your home is valued at $1,000,000, and your current mortgage balance is $450,000.
This means you may be eligible to borrow up to $350,000 in equity to use as a deposit for your investment property - without incurring LMI costs.
Keep in mind that your borrowing capacity will also be subject to income, expenses, and serviceability checks. But understanding accessible equity gives you a clear starting point in assessing your potential buying power.
Explore options: Refinance your home loan
Run the numbers: Home equity calculator
You could take out a separate loan secured against your home, or set up a line of credit that allows you to draw funds as needed.
This method involves using multiple properties - typically your current home and the new investment property - as joint security for one or more loans. While it can streamline the borrowing process by consolidating loans under a single facility, it also introduces added financial complexity and risk.
For example, if you decide to sell one of the cross-collateralised properties, the lender will usually require a revaluation of the remaining property or properties to ensure the overall loan-to-value ratio (LVR) remains within acceptable limits. If the LVR increases beyond the lender’s threshold, you may need to repay part of the loan before they release the sold property from the mortgage.
This structure can limit your flexibility to sell or refinance individual properties in the future, so it should be used with careful planning and a clear exit strategy.
Rental income from your prospective investment property can play a key role in strengthening your borrowing position. Most mainstream lenders will factor in a portion of anticipated rent - typically around 70–80% - when assessing your serviceability.
However, lenders who specialise in investment property financing - like Yard - can consider a higher percentage of rental income, often between 90–95%, depending on the property type, location, and lease terms. This more generous approach can significantly increase your borrowing capacity, making it easier to fund a quality investment.
Lenders will also take into account ongoing investment property expenses, such as:
These costs are deducted from the gross rental income to calculate the net rental contribution, which is what ultimately impacts your borrowing power.
Learn more: How rental income can help finance property investments
Calculate your equity: Home equity calculator
To secure approval on an investment property loan, lenders will review several financial and property-based factors:
Also, the type of loan product you choose - principal and interest vs. interest-only - can influence both your monthly obligations and your long-term wealth-building strategy.
Equity is more than just a figure on your mortgage statement - it’s potential. By leveraging equity smartly, you can secure an investment property mortgage, diversify your portfolio, and strengthen your future financial position.
But it’s not without risks. Increased debt levels, fluctuating property values, and rental income variability must be planned for. That’s why getting personalised advice and choosing the right loan structure is key.
Yard helps investors across Australia navigate property investment financing with expert advice and competitive options tailored to your goals.
Continue your journey:
An investment property loan is used to purchase property intended for rental income or resale, not to live in.
Yes, they are typically 0.25% to 0.50% higher than standard home loan rates. You can view Yard's owner-occupied and investor rates here.
Yes, investment mortgage rates are typically higher due to the additional risk lenders associate with investment properties. This reflects the market dynamics and risk assessment involved in property investment financing.
Yes, options include principal and interest (P&I) versus interest-only (IO) loans, variable versus fixed interest rates, low deposit home loans, and fully featured products with offset accounts. Speak with a qualified lender that specialises in investment property finance to help determine the best fit for your goals. You can see Yard's investment property loan rates here.
They carry greater risk for lenders, often require larger deposits, and may involve additional assessments, e.g. rental appraisal for the property, vacancy rates, etc.
A higher credit score improves your chances of approval and access to competitive interest rates.
Investment property loans usually involve higher interest rates, stricter approval criteria, and rental income considerations. They are structured for income-generating purposes rather than owner-occupation. Read more
Build more equity, reduce your debt-to-income (DTI) ratio, maintain good credit, and consider choosing properties with strong rental appeal.
New loan inquiries: hello@yard.com.au
Service requests: help@yard.com.au
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