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Using equity to buy an investment property

Equity is the amount of your home that you own outright and don't owe against, not including anything that you still owe the bank.

How home equity works

If you've repaid 60% of your home loan then it means that your equity is 60% of the home's value.

If you already own a home you're likely to have built up your equity. Unlocking this could let you buy that second property without a cash deposit.

What using equity means

The most popular way of tapping into your equity is refinancing your current home loan. You may even get access to a lower interest rate on your refinance loan. Keep in mind that using equity means the total amount owing on the home loan will increase, potentially leading to higher monthly repayments.

How much equity can you use

Generally, you can use up to 80% of the property value as equity towards a loan, In some instances, you may need to take out Lender's Mortgage Insurance (LMI). However, this varies based on the type of property, location of the property, purpose of the loan and the bank's policy.

We use a calculation called Loan to Value Ratio (LVR), which is based on your existing loan divided by the current property value.

How to access your home equity

If you're planning to refinance your home to unlock the equity, here are 4 steps you can take:

  • Contact your mortgage lender by phone, online or in a branch about your refinancing options
  • You may be able to submit your enquiry online; include details about you and the property such as income and expenses, and debts and assets
  • Talk to your own home loan manager and discuss what else you'll need in order to refinance/apply for a loan
  • Seek your new loan approval and you're one step closer to purchasing your investment property
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Next steps

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Important information

This article is intended to provide general information of an educational nature only. This information should not be relied upon as personal financial product advice as it does not take into account your individual objectives, financial situation or needs. You should consider the appropriateness of the information to your own circumstances and seek independent legal and financial advice prior to making any investment choice. There are risks associated with any investment and this document is not intended to list all of them in respect to any particular investment opportunity. Prices, levels and indications contained in this document are illustrative only and may not represent future performance. HSBC does not warrant or represent the performance of any investment opportunity. 

 

Disclaimer: Credit provided by HSBC Bank Australia ABN 48 006 434 162. AFSL/Australia Credit Licence 232595. Home Loan Terms (PDF), Personal Banking Booklet (PDF), Fees and Charges (PDF), and lending criteria apply. This article does not take into account your personal or financial situation. Please consider a relevant Product Disclosure Statement, available at hsbc.com.au or by calling 1300 308 008 before making a decision about this product.