You can use the equity in your home as the deposit for an investment property. The catch is that you are borrowing against a home you already live in, so the way you set it up matters.
This guide is for registered nurses and midwives who own a home, have built up some equity, and are weighing up a second property. We will cover how equity release works, what it can cost you, and one tax detail that is easy to get wrong.
How Does Home Equity Help You Buy an Investment Property?
Equity is the gap between what your home is worth and what you owe on it. A lender may let you borrow part of that gap as a separate loan, and you use those funds as the deposit and costs on your next purchase.
Lenders usually work to an 80 per cent loan to value ratio (LVR) on total debt. That is a lender policy line, not a legal limit. Above 80 per cent, lenders mortgage insurance (LMI) is generally required. Each lender sets its own caps on how much equity it will release, so the amount available to you depends on the lender you choose.
A broker can compare lenders for you. Our equity release loans for nurses page explains how we approach it.
Equity Release Pros: What You Gain
The main benefit is that you may not need to save a cash deposit from scratch. If your home has grown in value or you have paid down the loan, that equity can start working for you sooner.
It can also let you buy in your own timeframe. Some borrowers prefer this over waiting years to save a separate deposit. If you are new to investing, our first investment property guide covers the early steps.
The trade-off is that you are using one property to secure two. Your home becomes security for the extra borrowing, so a problem with the investment can put pressure on your home.
Equity Release Cons: What It Can Cost You
The main costs are more debt, higher total repayments and more risk. You are borrowing the deposit as well as the purchase price, so your total debt rises and you may be exposed to rate rises on both loans.
Lenders also assess whether you can afford the new debt. APRA requires banks and other authorised deposit-taking institutions to test new borrowers at an interest rate at least 3.0 percentage points above the loan rate. If rent will count towards your income, the guidance says a prudent lender counts no more than 80 per cent of expected rent, to allow for vacancy.
An interest-only structure on the investment loan lowers repayments, but it does not raise your borrowing capacity. Lenders assess it over the shorter remaining principal and interest term. You also pay down none of the loan during the interest-only period. See our interest only loans for nurses page for the trade-offs.
Free Property Report
Get a free Property Report from Nurse Loans, the team who understands the needs of Nurses & Midwives.
How Do You Keep the Equity Loan Tax-Deductible?
Interest is deductible based on what you do with the borrowed money, not on which property secures the loan. The ATO looks at how each amount is used.
If you borrow against your home and use all of it for the investment property, the interest on that part is generally deductible while the property is rented or available for rent. If you spend part of it on a car or a holiday, interest on that part is not deductible. Mixing purposes makes records harder and can reduce your deduction.
A common approach is to keep the equity release as its own loan split, used only for the investment. Keep your loan statements and settlement records. Only the interest part of a repayment is deductible, not the amount that pays down the loan. Please speak with your accountant before you rely on any of this, as tax outcomes depend on your situation.
Negative gearing rules have also changed. Losses from established residential properties bought after 7:30pm AEST on 12 May 2026 can only be deducted against other residential property income from the 2027-28 income year. Properties held at that time, and eligible new builds, keep the existing treatment. Your accountant can confirm how this applies to you.
Example: A Midwife Releasing Equity for a Unit
Consider a midwife who owns her home and wants to buy a unit as an investment. Her current loan is well under 80 per cent of the home's value, so she asks a broker to check how much equity a lender would release.
The broker sets up a separate equity loan, so the funds used for the deposit are clearly tied to the investment. The purchase loan is placed with a lender that counts her income accurately, and the broker checks the combined debt against the lender's serviceability test.
As an illustration only, suppose the investment loan is $500,000 at an example rate of 6.75% p.a. over 30 years on principal and interest. The repayment is about $3,243 a month. If she chose interest-only on the same loan at the same rate, the repayment would be about $2,813 a month, but the balance would not fall. When principal and interest begin after, say, five years, the repayment is worked out over the remaining 25 years and rises to about $3,455 a month.
Her outcome is a clear picture before she commits. She knows the monthly cost, understands that the equity loan interest is deductible only because it funds the investment, and has set aside a buffer for vacancy and rate changes. She then decides whether to proceed. Use our borrowing capacity page to get a starting point for your own numbers.
When Equity Release Is Not the Right Move
If your home loan is close to 80 per cent LVR, or your budget is already tight, equity release may add more risk than it is worth. Pushing total debt above 80 per cent usually means LMI, and some lenders have waivers for nurses and midwives with conditions on income and loan size.
Talk to a broker about alternatives. Our home loans for nurses page covers options for owner-occupiers, and our first home buyer loans for nurses guide is useful if you are still on your way to your first purchase. If you want advice from people who work with nurses and midwives every day, a mortgage broker for nurses can run the numbers across lenders.
You can also review the expanding your property portfolio page if you are thinking about the longer term.
Call one of our team or book an appointment at a time that works for you. We will check your equity, your serviceability and the loan structure before you commit to anything.
Frequently Asked Questions
Can I use home equity as a deposit for an investment property?
Yes, many lenders allow you to borrow against the equity in your home to fund a deposit and costs. How much you can release depends on the lender's policy and your ability to service the extra debt.
Is interest on an equity release loan tax-deductible?
Interest is generally deductible based on how the borrowed money is used, not the property that secures it. If the funds go towards an investment property, the interest on that part may be deductible, but speak with your accountant about your situation.
Does an interest-only loan increase how much I can borrow?
No. Lenders assess interest-only loans on principal and interest repayments over the shorter remaining term, so borrowing capacity does not rise. It lowers repayments for a time, but you do not reduce the loan balance.
When do I need LMI on an equity release?
LMI is generally required when total debt goes above 80 per cent of the property value. Some lenders offer waivers for registered nurses and midwives, with conditions on income and loan size.
