Using Your Home to Grow Your Wealth: How to Leverage Equity to Buy a Rental

You have worked hard to buy your home. Paid the mortgage, watched the value rise, and chipped away at the balance over time. Now you might be wondering: can this be the foundation for something more?

If you have built up equity in your home, the answer might be yes.

Equity is one of the most powerful tools available to homeowners. Used wisely, it can open the door to building a property portfolio and securing your financial future. Here is how it works.

What is Equity?

Equity is the difference between what your home is worth and what you still owe on your mortgage. For example, if your home is valued at $900,000 and your mortgage is $500,000, you have $400,000 in equity.

Banks will typically let you borrow against a portion of that equity, often up to 80 percent of your home’s value (depending on your circumstances). That borrowed amount can then be used as the deposit for a rental property.

In short, your home can help you buy another.

Why Use Equity to Buy a Rental?

There are a few compelling reasons people use equity to invest in property:

• You do not need to save a full deposit again.
• Rental properties can generate long-term income.
• Property values may increase over time.
• There can be tax benefits, depending on how the investment is structured.

Of course, every financial strategy comes with risks. An additional property means more debt, more responsibility, and the need to plan carefully. But for many, the rewards can outweigh the risks when it is done right.

What Do Lenders Look For?

Using your equity is not just about the numbers on paper. Lenders will assess your full financial position before approving a new loan. That includes:

• The equity you have available.
• Your household income and expenses.
• Your existing debt levels.
• Your credit history and ability to repay both loans.

Serviceability is key. The bank needs to see that you can afford the repayments on both your current mortgage and the new investment loan.

This is where having a well-structured plan makes a real difference.

Structuring Your Lending the Smart Way

There are several ways to access your equity: a loan top-up, a separate loan secured against your home, or a revolving credit facility. The structure you choose can affect your flexibility, tax position, and future borrowing power.

For example, it might be smarter to separate the lending for your rental from your personal mortgage. That way, you can keep things clear and potentially optimise interest costs. But every situation is different, and this is not a one-size-fits-all strategy.

Advice matters here. A good adviser will explain your options in plain English, help you avoid common pitfalls, and tailor a structure that suits your goals and lifestyle.

Making the Numbers Work

Before you buy, make sure the property stacks up financially. This means looking at more than just the purchase price.

Factor in:

• Expected rental income.
• Mortgage repayments.
• Property rates and insurance.
• Maintenance and repairs.
• Property management fees, if you use a manager.

Also think ahead. Can the investment still hold up if interest rates rise, or if the property sits empty for a month or two?

Here is a simplified example:

If you have $200,000 in usable equity, and you want to buy a $600,000 rental, that equity can form the 30 to 40 percent deposit most banks now require. The remaining $400,000 would be borrowed against the new property. Provided your income can support it, you now own two properties without needing to save another deposit from scratch.

Why Now Could Be a Good Time

With the property market shifting and interest rates beginning to settle, many would-be investors are reconsidering their next move.

More listings, more motivated sellers, and the return of some balance to the market could mean new opportunities for well-prepared buyers.

If you already own a home, this could be the moment to use your equity to step into something bigger.

This is About More Than Property

At Lifetime, we believe financial advice should be about people first, not products.

Buying a second property is not just a transaction. It is a step toward financial independence, lifestyle flexibility, and long-term security. But only when it fits your goals.

Our advisers take the time to understand your situation, explain your options, and partner with you every step of the way. We call it Advice for Life. Because when your life changes, your financial strategy should too.

Ready to Explore Your Options?

You do not have to be a property expert to get started. You just need the right advice and a plan that fits.

If you would like to find out how much equity you could use, what the next steps might look like, or whether a rental property fits into your future, we are here to help.

The second property might feel like a big leap. But it all starts with a conversation.

Article by Sarah Maclennan

Get in touch today and we can help you take the next step with confidence.

This article is for general information purposes only and does not constitute financial advice. The content is based on information current at the time of writing and may be subject to change.

Lifetime Group Limited is a licensed Financial Advice Provider. For advice specific to your situation, please speak with a Financial Adviser. You can view our Disclosure Statement here.

All investments involve risk and are not guaranteed. Any examples or projections are for illustration only and should not be relied on as advice.