If you own a home in Perth and have been paying down your mortgage for a few years, there is a good chance you are sitting on more equity than you realise. Perth property values have risen strongly over the past three years, which means many homeowners have seen their equity grow faster than their repayments alone would account for. That equity can be a powerful tool for building wealth, and one of the most common ways homeowners use equity to buy property is by funding the purchase of an investment property.
But is this actually possible, and how does it work in practice?
What Is Home Equity and How Is It Calculated?
Equity is the difference between the current market value of your property and the amount you still owe on your mortgage. If your home is currently worth $900,000 and your outstanding loan balance is $520,000, your total equity is $380,000.
However, not all of that equity is available to use. Lenders typically allow borrowers to access equity up to 80% of the property’s current value without triggering Lenders Mortgage Insurance. The formula for calculating usable equity is straightforward: take 80% of your property’s current value and subtract your outstanding loan balance.
Using the example above, 80% of $900,000 is $720,000. Subtract the $520,000 outstanding balance and the usable equity is $200,000. That is the amount you could potentially draw on to fund a deposit and purchase costs for an investment property, without paying LMI on the equity release.
It is possible to access equity above the 80% LVR threshold, but doing so typically involves LMI and increases your overall financial risk. Most experienced investors and brokers recommend working within the 80% boundary where possible.
How Do You Actually Access the Equity?
There are two common ways to access equity for an investment purchase. The first is to refinance your existing home loan to a higher amount and receive the additional funds, which are then used as the deposit for the investment property. For example, if your current loan balance is $520,000 and your usable equity is $200,000, you could refinance to a loan of $720,000 and use the additional $200,000 as the investment deposit.
The second approach is to establish a separate home equity loan or line of credit secured against your existing property. This keeps the equity release clearly separated from your original home loan, which can be beneficial from a tax perspective since the interest on funds used for investment purposes is generally tax deductible in Australia.
The right structure depends on your financial circumstances, your tax situation, and your long-term goals. Speaking with both a mortgage broker and an accountant before deciding on the structure is strongly recommended, as getting it right from the outset avoids complications later.
How Much Deposit Do You Need for an Investment Property?
Most lenders require a minimum of 10% to 20% deposit for an investment property purchase, depending on the lender, the property type, and your overall financial profile. Unlike owner-occupied purchases, investment loans are generally assessed at a slightly higher risk level, and some lenders require a minimum of 20% for investment lending.
On top of the deposit, you also need to cover the purchase costs for the investment property. In Western Australia, these include stamp duty, conveyancing fees, building inspections, and loan establishment costs. For an investment property purchase in Perth, you should budget for an additional 4% to 6% of the purchase price in upfront costs on top of the deposit itself.
Use our Stamp Duty Calculator to get an accurate figure for your specific purchase price, noting that investment property stamp duty in WA does not attract the same concessions available to owner-occupiers and first home buyers.
Do You Need to Qualify for Both Loans?
Yes. Accessing equity provides your deposit, but you still need to demonstrate to a lender that you can service the total debt load: your existing home loan plus the new investment loan. This is a crucial distinction that catches some borrowers off guard.
Lenders assess investment loan serviceability using the same framework as owner-occupied loans, with a buffer rate applied above the actual loan rate. They will factor in your existing home loan repayments, your living expenses, any other existing debts, and the rental income from the proposed investment property. Most lenders apply a discount to the rental income figure, typically 70% to 80% of the gross rental estimate, to account for vacancies and ongoing property expenses.
The net result is that your borrowing capacity for the investment loan is separate from and in addition to your equity position. You need both: sufficient accessible equity for the deposit, and sufficient income to service both loans comfortably.
Our Borrowing Power Calculator can give you a starting estimate, but speaking with a broker is the most reliable way to understand exactly what you can borrow across both loans.
What Are the Tax Considerations?
One of the significant advantages of investment property in Australia is that the interest on the investment loan is generally tax deductible against the rental income it produces. If the property is negatively geared, meaning the rental income is less than the total expenses including interest, the shortfall can in most cases be offset against your other income to reduce your overall tax liability.
However, tax deductibility depends entirely on how the loan is structured. If the equity release from your home loan is mixed with personal funds or used for non-investment purposes, the interest may not be fully deductible. This is why keeping the investment borrowing clearly separated from your personal borrowing is so important, and why getting advice from a qualified accountant before you structure the loans is not optional if you want to maximise your tax position.
What Are the Risks of Using Equity to Invest?
Using equity to invest in property is a proven wealth-building strategy, but it involves real risks that every buyer should understand before proceeding.
The most significant risk is that you are increasing your total debt and your financial exposure across two properties. If either property declines in value, or if both decline simultaneously, your equity position across your portfolio can deteriorate quickly. In a worst-case scenario, you could owe more across the two loans than the combined value of both properties.
Vacancy risk is also real. An investment property that sits vacant for two or three months means you are servicing the investment loan entirely from your own income, without the rental contribution you were counting on. A financial buffer of at least three to six months of total loan repayments is a prudent protection against this scenario.
Interest rate movements over time also affect the cost of servicing two loans. While the current environment has seen rate reductions, rates can and do rise over a 20 to 30 year investment horizon. Stress testing your ability to service both loans at a higher rate before you commit is a wise step.
Perth as an Investment Market in 2026
Perth has been one of the strongest performing property markets in Australia over the past three years, driven by strong population growth, a tight rental market, and limited housing supply. Vacancy rates in Perth have remained at historically low levels, and rental yields have risen considerably compared to the east coast capitals, making Perth increasingly attractive to property investors.
For Perth homeowners with accessible equity, the combination of a strong local investment market and historically available equity creates a genuine opportunity. That said, individual suburb and property selection still matters enormously, and investing in the right location within Perth is as important as the financial structure of the purchase.
Our team can connect you with our network of professionals and discuss the full picture of investment property loans in Perth, including which lenders are currently offering the most competitive rates for investor borrowers.
Is This Strategy Right for You?
Using equity to buy an investment property suits homeowners who have built meaningful equity, have stable income to service both loans, have a medium to long term investment outlook, and have planned carefully for the ongoing costs and risks of property investment. It is not a strategy for buyers who are already financially stretched on their existing loan or who have not thought through the full cost of owning and managing an investment property over time.
The most reliable way to assess whether this strategy makes sense for your specific situation is to have a direct conversation with an experienced mortgage broker. At Central Lending Solutions, our team can review your equity position, calculate your borrowing capacity across both loans, and guide you through the most suitable structure. Contact us today for a free consultation.
Frequently Asked Questions
How do I know how much equity I have in my Perth home?
You can get a rough estimate by looking at recent comparable sales in your suburb and comparing to your outstanding loan balance. For a more accurate figure, your lender or a mortgage broker can order a desktop valuation or a full valuation of your property. A full valuation conducted by a registered valuer is the most reliable method and is typically required by lenders before approving an equity release.
Can I use equity as the entire deposit for an investment property?
Yes, provided you have enough accessible equity to cover the full deposit plus purchase costs, and your income is sufficient to service both loans. The investment property deposit and all associated costs can come entirely from the equity in your existing home, meaning you do not need to contribute additional cash savings.
Does accessing equity affect my existing home loan rate?
If you refinance to access equity, the terms of your new loan including the rate will be set based on current market conditions and the lender’s assessment of your profile. In some cases, refinancing to access equity can also be an opportunity to secure a more competitive rate on your home loan than you are currently paying. A broker can assess whether this is possible for your situation.
What happens to my equity position if Perth property values fall?
If your property value falls, your equity reduces accordingly. If the value falls enough to push your LVR above 80%, your accessible equity reduces or disappears entirely. This is why maintaining a financial buffer and not over-leveraging against your equity is important. Buying investment property with equity should always be done with a conservative view of potential value movements, not just the optimistic scenario.
Do I need a separate loan for the investment property or can it all be on one loan?
For tax and accounting purposes, it is strongly recommended to keep the investment loan separate from your home loan. Mixing personal and investment borrowing on a single loan can make it very difficult to demonstrate which portion of the interest is deductible. A structured approach with clearly separated loans from the outset makes the tax position far cleaner and is the approach most accountants will recommend.
Ready to Find Out How Much Equity You Can Put to Work?
Our team at Central Lending Solutions helps Perth homeowners assess their equity position, understand their investment borrowing capacity, and structure their loans correctly from the start. We compare lenders across our full panel and manage the process at no cost to you. Book a free consultation today.
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Contact our team if you have questions about home loans, refinancing, or other lending options. Call us, book a time to speak, or send us an email and we will get back to you.
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Central Lending Solutions is a Perth-based mortgage brokerage with over 20 years of experience in the finance industry. Our team helps clients compare lenders and navigate the home loan process from enquiry through to approval.
