Home equity is often the single biggest financial asset most Australian homeowners have, and it can be used in genuinely different ways depending on your stage of life. For some, it’s the deposit for a second investment property. For others, decades later, it’s a way to access capital in retirement without selling the family home. These are very different decisions with very different risks.
At MC Mortgage Solutions, we work with equity every day, mostly helping working-age homeowners use it to expand into investment property. We’re not financial advisers, and for retirement-stage equity release specifically, that’s genuinely a decision that needs a financial adviser or the government’s Financial Information Service alongside any lending advice. This guide explains both sides accurately, current as at August 2026.
What Home Equity Actually Is
Understanding the numbers here matters before any strategy makes sense.
Total Equity vs. Usable Equity
Home equity is the difference between your property’s current market value and what you still owe on it. But total equity isn’t what you can actually borrow against. Lenders commonly use 80% of your property’s assessed value as a planning benchmark before Lender’s Mortgage Insurance applies, so usable equity is often calculated as 80% of your property’s value, minus your current mortgage balance. What you can genuinely access depends on the lender’s own valuation, your serviceability, their credit policy, the purpose of the loan, and their acceptable loan-to-value ratio, borrowing above 80% may still be available through some lenders, generally with LMI applying.
A Worked Example
If your home is valued at $800,000 and you owe $400,000, your total equity is $400,000. Using the 80% benchmark, 80% of $800,000 is $640,000, and subtracting your $400,000 mortgage balance leaves an estimated $240,000 in usable equity. This is a planning figure, not a guaranteed borrowing amount, your actual accessible equity is confirmed by your lender once they’ve assessed the property and your financial position.
Using Equity to Expand a Property Portfolio
This is where most of our equity conversations actually happen, working-age homeowners looking to invest.
Equity as a Deposit, Not Cash Savings
Rather than saving a fresh cash deposit, investors commonly use usable equity in an existing property to fund the deposit, stamp duty, and acquisition costs on a new investment property purchase. This can meaningfully shorten the time between owning one property and owning two, but it also means both properties are now tied to your overall financial position, not just the new one.
Serviceability Still Applies
Having usable equity doesn’t automatically mean a lender will approve additional borrowing. You still need to demonstrate you can service the new loan, based on your income, expenses, existing debts, and the lender’s assessment of likely rental income on the new property. It’s worth knowing that lenders typically only count a portion of expected rental income toward serviceability, not the full amount, so relying on gross rental figures alone can overstate what you’ll actually be approved for. Equity gets you to the deposit. Serviceability gets you the loan.
The Real Risks of Borrowing Against Your Home
This is genuinely worth reading properly, not skimming. ASIC describes borrowing to invest, also called gearing, as a high-risk strategy, and using your home as security raises the stakes further.
What Can Go Wrong
The core risks are straightforward but easy to underweight when a deal feels exciting: bigger losses if the investment falls in value, since you still owe the loan and interest regardless of how the investment performs, the risk that a property’s value falls or takes longer to sell than expected, investment income risk if rental income is lower than expected or a property sits vacant, and interest rate risk if you’re on a variable rate and rates rise. Ongoing costs like maintenance, council rates, insurance, and vacancy periods all need to be covered whether or not the investment is performing.
Your Home Is the Security
If you use equity in your home to fund an investment property and the investment turns bad, your home is what secures that borrowing. This is the plainest way to say it: you could lose your home if you can’t keep up with repayments on the combined debt. We walk every equity-funded client through this before recommending a structure, not after.
How to Structure an Equity-Funded Investment Loan
The structure you choose has real consequences for both cost and tax outcomes, and the right one depends on your circumstances, your lender, and tax advice specific to you.
Separate Equity Loan or Loan Split
This generally means splitting your existing mortgage into its own sub-account, or refinancing into a new loan, specifically for the investment purchase. It creates a clean, separate loan for the new property, which supports a clearer record of how the funds were used, genuinely useful if you ever need to substantiate a tax position, though the purpose and movement of every drawdown still matters, a separate account alone doesn’t automatically make interest deductible.
Line of Credit
A revolving facility secured against your home equity, with interest charged only on the amount drawn. This offers flexibility, but often at a higher interest rate than a standard loan, and usually comes with its own specific repayment requirements you’ll need to understand before relying on it.
Cross-Collateralisation
This means multiple properties, your home and your new investment property, secure one or more related loans with the same lender. Some lenders present this as the simplest option, but it’s worth understanding the trade-off clearly: it can restrict your ability to refinance, access equity independently, or sell one property without affecting the other. We generally walk clients through both structures before recommending either.
Tax Deductibility and Investment Loans
This is genuinely useful to understand, though it’s also genuinely the domain of your accountant, not your broker.
What Determines Deductibility
According to the ATO, it’s the use of the borrowed funds, not the asset used as security, that determines whether loan interest is tax-deductible. If you draw down equity from your home to purchase an income-producing asset, such as a rental property, the interest on that specific borrowing is generally deductible against your assessable income, even though your home is what secured the loan. Worth noting too, the 2026 Federal Budget announced changes to how negative gearing applies, so if this is relevant to your situation, check the current ATO guidance or speak with your accountant before assuming older rules still apply in full.
Why Mixed-Purpose Loans Create Problems
Mixing private spending, a home renovation, a car, a holiday, with investment funds in the same loan account creates a genuine tracing and apportionment problem. The ATO’s own guidance is clear that only the portion of a loan used for investment purposes is deductible, and keeping investment and private borrowing separate supports clearer tracing from the outset, rather than trying to untangle it later, though the underlying purpose of the funds is still what ultimately matters.
Borrowing Costs Are Also Deductible, Differently
Costs like loan establishment fees, valuation fees, and title search fees are generally deductible too. If your total borrowing expenses are $100 or less, they’re generally deductible in the year you incur them. Above $100, they’re normally spread over 5 years or the life of the loan, whichever is shorter, not upfront. In Queensland specifically, mortgage duty was abolished back in 2008, so this isn’t a live cost on a new mortgage here, unlike duty on the actual property purchase, which is a separate capital expense affecting your cost base for capital gains tax purposes rather than a borrowing expense. Your accountant is the right person to apply these rules to your specific situation.
Equity Release Options for Retirees
This is a genuinely different conversation to investment borrowing, and it comes with meaningfully different considerations.
Reverse Mortgages
A reverse mortgage lets homeowners aged 60 and over borrow against their home equity, as a lump sum, income stream, or line of credit, without making regular repayments while living in the home. What’s worth knowing upfront is that the amount you can borrow is age-scaled, not a flat percentage: at 60, it’s typically around 15 to 20% of your home’s value, increasing by roughly 1% for each year over 60. Interest compounds over the life of the loan, and reverse mortgages taken out since 18 September 2012 include a statutory negative equity guarantee, meaning you can’t end up owing more than your home is worth.
Other Equity Release Pathways
Beyond reverse mortgages, Australians can also access home sale proceeds sharing, sometimes called home reversion, where you sell a share of your home’s future value now for a discounted lump sum today. There’s also a distinct product called an equity release agreement, where you sell a portion of your home’s equity to a provider and pay ongoing fees deducted from your remaining equity, which can reduce your share over time.
The government’s Home Equity Access Scheme is a further option for those who are Age Pension age or older, a voluntary loan from Services Australia secured against real estate, paid as a fortnightly amount, a lump sum advance, or a combination of both. Its current interest rate is 3.95% per annum, compounding fortnightly, though this rate can change over time, so it’s worth confirming the current figure directly with Services Australia rather than relying on a fixed number.
Where a Broker Fits Into an Equity Release Decision
We want to be genuinely direct about this rather than either overstate or understate our role. Equity release decisions in retirement affect your Age Pension eligibility, your ability to afford aged care later, what you leave behind for family, and whether anyone living with you can stay in the home. These are exactly the considerations the government’s own consumer guidance stresses before anyone signs up to a reverse mortgage or similar product.
An appropriately authorised broker or lender can provide credit assistance for products like a reverse mortgage, that’s a genuine part of the lending landscape. What we’d say plainly is that retirement equity release calls for more than loan comparison, a financial adviser is who covers your broader retirement strategy, and Services Australia’s Financial Information Service can explain how a decision might affect your pension, neither of which is something we can properly substitute for. If retirement-stage equity release is what brought you here, we’ll be upfront with you about where our role starts and stops.
How MC Mortgage Solutions Can Help With Investment Equity
Where we genuinely add value is helping working-age homeowners use their equity to expand into investment property. That means calculating an estimate of your usable equity based on lender valuation and policy, comparing loan structures across 30 or more lenders, and making sure your new loan is set up cleanly from the start, so your accountant has a clear picture come tax time.
See What Your Equity Could Support
Before you look seriously at another property, it’s worth understanding what your current equity position could realistically support, and what it can’t. Valuation, serviceability, your existing debts, cash flow, and lender policy all shape the outcome, so a genuine estimate needs more than a back-of-envelope calculation.
Talk to MC Mortgage Solutions before you start looking at investment properties, not after. We’ll work through an estimate based on lender valuation and policy, walk you through the loan structures and risks that apply to your situation, and connect you with a lender whose policy actually fits, all before you’ve made an offer on anything. Call us on 07 3893 3208 or get in touch to book a free chat with our Brisbane bayside team.
Frequently Asked Questions About Using Home Equity
Total equity is your property’s value minus what you owe. Usable equity is an estimate of what a lender might let you borrow against, commonly benchmarked at 80% of your property’s value minus your current mortgage balance, though the actual figure depends on lender valuation, policy, and your serviceability.
Often, yes. Many investors use usable equity in their current home to fund the deposit and costs on a new purchase, rather than saving separately. You’ll still need to meet the lender’s serviceability requirements for the new loan.
It depends on your circumstances. Linking multiple properties under one or more related loans can simplify the initial setup, but it can also limit your ability to refinance, access equity independently, or sell one property without affecting the other. We generally recommend understanding both options before choosing.
Generally, yes, if the borrowed funds are used to purchase an income-producing asset, based on how you use the funds rather than what secures the loan. This is a question to confirm with your accountant, particularly given recent changes to negative gearing announced in the 2026 Federal Budget.
It creates a genuine tracing problem, since only the investment portion of the loan is generally deductible. Keeping investment and private borrowing in separate loan accounts supports clearer tracing, though the purpose of the funds is still what ultimately determines deductibility.
The main risks include owing more than your investment is worth if it falls in value, rental income being lower than expected or the property sitting vacant, rising interest rates increasing your repayments, and the fact that your home secures the borrowing, so a failed investment could put your home at risk.
It depends on your age. At 60, it’s typically around 15 to 20% of your home’s value, increasing by roughly 1% for each year over 60. This is a general guideline, not a fixed rule, and actual lender offers vary.
No. Options also include home sale proceeds sharing, equity release agreements, and the government’s Home Equity Access Scheme for those Age Pension age or older, each with different eligibility, costs, and mechanics. This is genuinely a decision worth getting independent financial advice on.
An appropriately authorised broker can provide credit assistance for products like a reverse mortgage. For the broader retirement strategy questions that come with equity release, a financial adviser and Services Australia’s Financial Information Service are genuinely the right places to start, given how much it can affect your pension and aged care position.
Generally, yes. If your total borrowing expenses are $100 or less, they’re deductible in the year incurred. Above $100, they’re normally spread over 5 years or the life of the loan, whichever is shorter. Mortgage duty doesn’t apply in Queensland, it was abolished in 2008, though duty on the property purchase itself is a separate capital expense. Your accountant can confirm how this applies to your loan.
