Using equity to grow a property portfolio
How usable equity works, and how it's commonly used to fund a next purchase.
What is usable equity?
Your equity is the gap between your property's current market value and what you still owe on it. Lenders won't let you borrow against all of that gap — they cap what's called your usable equity to protect against market movements.
Example: A home valued at $800,000 — 80% of that is $640,000. With a $400,000 loan balance remaining, usable equity comes to roughly $240,000, which could potentially be drawn out as a deposit for a further purchase.
How the equity cycle typically works
Property value grows
You hold a property in a solid growth area — Brisbane's Southside, for example — and its value rises over time while your loan balance stays roughly stable.
An equity top-up is arranged
A top-up loan releases the usable equity into a separate account, which can then be used toward the deposit and costs on a further purchase.
A second asset is acquired
You now hold two properties, each building equity independently — though this also means twice the exposure to market movement and interest rate changes.
Managing the risk
Borrowing against equity is still borrowing, so it's worth building in safeguards:
- Keep a buffer. Holding some of the released equity in an offset account gives you a cushion for vacancies or unexpected repairs.
- Stress-test serviceability. Make sure your household income and rental returns could still cover repayments if interest rates rise.
Curious how much usable equity you have?
Let's run the numbers on your current property.
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