If you've owned a home in Brighton, Hampton or Sandringham for a while, there's a good chance you're sitting on more equity than you realise — and you can put it to work buying an investment property without saving a separate cash deposit.
Bayside is one of Melbourne's strongest-performing corridors. Owners who bought five or ten years ago have often seen their homes climb well past what they owe. That gap — your equity — is one of the most powerful and underused tools for building wealth. This guide explains how to use it properly: what "usable equity" actually means, a worked example with realistic Bayside numbers, the costs and tax changes to plan for, and how to structure the lending so it doesn't come back to bite you.
What is usable equity (and why it's less than you think)
Equity is the difference between what your home is worth and what you still owe on it. But you can't borrow against all of it. Lenders keep a buffer: most will lend up to 80% of your home's value without charging Lenders Mortgage Insurance (LMI). So your usable equity is roughly:
(Current value × 80%) − your current loan balance
You can borrow above 80% in some cases, but that usually means paying LMI — a one-off cost that can run into the tens of thousands on a high-value Bayside property. For most owners, the 80% line is the sensible planning number.
Worked example — a Brighton owner
| Current home value (Brighton) | $2,800,000 |
| Lender's 80% limit | $2,240,000 |
| Less: current loan balance | − $600,000 |
| Usable equity (before LMI, costs & servicing) | $1,640,000 |
That $1,640,000 is your equity headroom — not a spending limit. How much you actually use is set by what your income can comfortably service, which is the real constraint. A sensible approach is to release only enough for a 20% deposit plus purchase costs, then take a separate loan for the balance — so you're adding to your portfolio without stretching your repayments. We model this with a real buffer before you commit.
How the equity-release process actually works
In practice, using your equity follows a clear path:
- Revaluation. The lender orders a valuation of your existing home to confirm its current worth — this sets how much equity is on the table.
- Loan increase or new split. We arrange either a top-up of your existing loan or a new, separate loan split secured against your home. This split becomes the deposit and cost funding for the investment.
- The purchase loan. A second loan funds the balance of the investment property, secured against that property.
- Settlement. The deposit funds are ready when you need them, so you can bid or make an offer with certainty.
Done well, you end up with two clean, separate loans and a clear line between your home debt and your investment debt — which matters for both flexibility and tax.
Don't forget the full cost stack
Equity covers the deposit, but a purchase has other costs. In Victoria, budget for:
- Stamp duty. On an investment purchase there's no owner-occupier concession, so duty is a significant upfront cost — often well into six figures at Bayside price points.
- Legal and conveyancing fees, and lender/valuation costs.
- Victorian land tax. This is the one investors most often overlook. Land tax applies to investment property based on the land value, it's an ongoing annual cost, and recent years have seen thresholds lowered and surcharges added. It can meaningfully change your holding costs, so factor it in from day one.
- A servicing buffer. You're taking on more debt. Lenders assess you at a rate above the actual rate, and you should too — leave room for rate rises and vacancy periods.
2027 change: negative gearing on established homes
If part of your plan relies on negative gearing, this is important. Announced changes take effect from 1 July 2027: for established residential dwellings bought after 12 May 2026, the ability to offset rental losses against your other income is being restricted — broadly, the loss is carried forward to offset future rental or investment income rather than deducted immediately — while newly built homes keep the existing treatment. There are also changes to how the capital gains discount works over time.
What this means in practice: the type of property you buy (new vs established) and the timing can change your after-tax return. This is general information, not tax advice — the detail matters and your accountant should confirm your specific position before you commit. We'll make sure the lending structure lines up with whatever strategy you and your accountant land on.
Structure matters: cross-collateralisation vs standalone loans
Here's where a broker earns their keep. When you use equity to buy, the easy option a bank may offer is to secure both properties together under one loan — "cross-collateralisation." It's simple for the bank, but it often isn't in your interest:
- It ties your home and your investment together, so selling or refinancing one later becomes messier.
- It can blur the line between your (non-deductible) home debt and your (deductible) investment debt.
- It concentrates power with one lender — reducing your leverage to negotiate or move.
In most cases a cleaner structure is a separate equity-release split against your home plus a standalone loan on the investment — ideally spread across lenders where it suits you. It keeps your home better protected and your options open. The right answer depends on your goals, and it's exactly the kind of thing we map out before you buy.
The risks to weigh up
Using equity amplifies both gains and risks. Go in clear-eyed:
- More total debt. You're borrowing against your home to invest. If values fall, you could face negative equity across a larger position.
- Rate and vacancy risk. Higher borrowings mean higher repayments; a rental gap or rate rise hits harder.
- Ongoing holding costs. Land tax, insurance, maintenance and management fees eat into rental income.
- Concentration. If both properties are in the same market, you're doubling down on one area's cycle.
Is it the right move for you?
Using equity to invest can be a genuinely smart way to grow a portfolio faster than saving deposit after deposit — but only when the numbers, the structure and the tax position all stack up for your situation. As your broker, we work out exactly how much usable equity you have, model the repayments with a real buffer, and structure the loans to keep you flexible and protected. Under Best Interests Duty, we're legally bound to put your interests first, and our service is free to you — the lender pays us on settlement.
Want to know how much equity you could actually use? Try our calculators or book a chat below and we'll run the numbers together.