How to Use Your Home Equity to Buy a New Property in Australia

Thinking about upgrading your home or investing in a second property? You might not need to save from scratch. For many Australians, one of the smartest ways to buy a new property is by using the home equity they’ve already built up.

Your current home could hold the key to your next move, whether it’s expanding your portfolio, upsizing for a growing family, or securing a holiday home. 

In this guide, we’ll walk you through how home equity works, how to access it, and how to use it strategically to buy a new property without overextending your finances.

What Is Home Equity?

Home equity is the difference between the current market value of your home and the amount you still owe on your mortgage. For example, if your property is worth $900,000 and you owe $400,000, you have $500,000 in home equity.

This equity can be a powerful tool, allowing you to buy a new property without needing to save a full deposit from scratch.

Why Use Home Equity to Buy a New Property?

Using your home equity to fund the purchase of another property offers several advantages:

• No need to sell your current home

• Leverage existing assets

• Access better financing options

• Grow your investment portfolio

It’s a strategy commonly used by seasoned investors and growing families alike. If you're looking to buy a second home, an investment property, or even a holiday house, your equity can open doors that may otherwise remain closed.

Step-by-Step Guide: Using Your Home Equity to Buy a New Property

Using your home equity to buy a new property isn’t as complicated as it sounds, especially when you break it down into these simple steps:

1. Calculate Your Available Equity

First, get a current valuation of your home from a qualified valuer or real estate agent. Subtract your remaining mortgage from this value. Lenders usually allow you to access up to 80% of your property’s value, less any existing loans.

Example:

• Home value: $1,000,000

• 80% of value: $800,000

• Mortgage balance: $400,000

• Usable equity: $400,000

This $400,000 could act as a deposit or be used to purchase a new property outright, depending on the price point.

2. Speak to a Mortgage Broker or Financial Adviser

Before making any moves, it’s crucial to get professional advice. A mortgage broker can help you understand your borrowing power, potential risks and the best loan structure to suit your goals.

At Richmond Residential, we partner with trusted finance professionals to ensure our clients make informed decisions.

3. Decide How You’ll Use the Equity

There are two main ways to access equity:

• Refinancing: Replace your current loan with a new one that includes the equity amount.

• Equity Loan/Line of Credit: Access a separate loan using the equity as security.

The right option will depend on your financial situation and the type of property you want to buy.

4. Search for the Right Property

With your funding sorted, start looking for your new home or investment. Be strategic — consider rental yields, growth potential and location if buying an investment property. If upsizing, think about lifestyle factors and future needs.

5. Get Pre-Approval and Make Your Move

With pre-approval in place, you’ll have more confidence to act quickly when the right opportunity arises. Ensure you’re working with a buyer’s agent or a trusted real estate professional to negotiate and secure the property.

Risks to Consider

While using your home equity to buy a new property can be highly rewarding, it's not without risk:

•  Increasing your overall debt load

•  Rising interest rates affecting repayments

• Property market fluctuations impacting equity

• Strain on household cash flow

It’s important to stress-test your finances and work with a qualified advisor to ensure this strategy aligns with your long-term goals.

Final Thoughts

Using your home equity to buy a new property in Australia is a savvy strategy for building wealth and achieving your property goals. However, it requires careful planning and expert guidance.

At Richmond Residential, we’re here to help you take the next step confidently. Whether you’re buying a family home or growing your investment portfolio, our team can guide you through the process from start to finish.

Ready to Get Started?

Contact Richmond Residential today to speak with one of our property experts. Let’s turn your equity into opportunity.