USING EQUITY · EAST MONEY GUIDE
Using equity to buy your next property
Equity can contribute to a deposit and buying costs, but it is still borrowed money. A sound plan separates the new purpose clearly and tests whether the combined debt remains manageable.
East Money · General information
Separate total equity from usable equity
Total equity is the property value less the debt secured against it. The amount a lender may permit you to access is usually lower and depends on valuation, lending ratio, serviceability and policy.
Know how the funds will be used
An equity release may fund a deposit, purchase costs or improvements. Document the purpose before drawing funds and keep transfers easy to trace, especially where an investment is involved.
- Requested equity amount
- Deposit and purchase costs
- Any remaining cash contribution
- A separate loan split for a separate purpose
Serviceability remains the main test
Property value does not by itself create borrowing capacity. The lender still assesses income, rent, living expenses and existing commitments under its serviceability rules.
Understand which properties secure which debts
Using multiple properties as security can reduce flexibility when selling or refinancing. Ask whether the transaction can be structured with separate securities and clear loan splits.
Stress test the combined position
Consider vacancies, repairs, rate changes and periods of lower income. The plan should work beyond settlement rather than depending on every assumption being favourable.
QUESTIONS PEOPLE OFTEN ASK
Useful points to clarify early.
Can equity replace my cash deposit?
Borrowed equity may cover some or all of a deposit and costs, subject to valuation, lending ratio and serviceability.
Does using equity increase my home-loan risk?
Yes. It increases debt secured against property, so repayments, security structure and buffers need to be understood.
Should the equity release be a separate split?
A separate split often makes the purpose easier to track. Ask your tax adviser how the structure affects your circumstances.
OFFICIAL RESOURCES
Explore the matching calculator
MAKE THE GUIDE PERSONAL