If you own property in Chadstone and have built up equity, you can use that equity as a deposit to purchase an investment property without needing to save a separate cash deposit.
Equity is the difference between what your property is worth and what you owe on it. When you use equity from your home to fund an investment purchase, the lender treats that equity as your deposit contribution. This approach allows property owners to expand their portfolio without tying up additional cash savings, though it does increase your overall debt position and requires careful assessment of your borrowing capacity.
How Equity Release Works for Investment Purchases
You access equity by refinancing your existing home loan or establishing a separate loan facility secured against your property. Most lenders will allow you to borrow up to 80% of your property's value without requiring Lenders Mortgage Insurance. If your Chadstone property is valued at $900,000 and you owe $500,000, you have $400,000 in equity. At 80% loan to value ratio, the lender would allow total borrowing of $720,000, meaning you could potentially access $220,000 in usable equity after retaining the existing loan balance.
That $220,000 can then be used as a deposit and to cover purchase costs on an investment property. The equity release is structured as a separate loan split or line of credit, keeping the funds for the investment purchase distinct from your home loan. This separation makes tax reporting clearer, as interest on the investment portion may be tax deductible while interest on your home loan generally is not.
Consider a scenario where a Chadstone homeowner refinances to access $180,000 in equity. They use $160,000 as a 20% deposit on an $800,000 investment property and the remaining $20,000 to cover stamp duty and settlement costs. The lender then provides an investment loan for the remaining $640,000 secured against the investment property. The borrower now has two properties and three loan accounts: the original home loan, the equity release loan, and the investment property loan.
Borrowing Capacity and Serviceability Assessment
Lenders assess your ability to service both your existing home loan and the new investment loan, including the equity you are releasing. The assessment includes your rental income from the proposed investment property, but lenders typically only credit 80% of the expected rent to account for vacancy periods and maintenance costs. Your employment income, existing debts, living expenses, and current loan repayments all factor into the calculation.
For properties in high-demand areas near Chadstone Central or Holmesglen Station, rental yields may support stronger serviceability outcomes. However, body corporate fees on units and apartments reduce net rental income and affect how much lenders will credit toward your borrowing capacity. If you are considering an interest only repayment structure to improve cash flow, be aware that lenders still assess serviceability on a principal and interest basis, even if you intend to make interest only payments initially.
Loan Structure Considerations for Property Investors
How you structure your loans impacts both tax efficiency and financial flexibility. Splitting your home loan from your investment borrowing ensures that interest on investment debt remains fully deductible, while keeping personal debt separate. Many investors establish their equity release as a standalone loan split or line of credit, which provides flexibility to redraw funds if needed for future investments or property improvements.
Variable rate loans offer flexibility and often come with offset accounts, which can be useful for managing cash flow. Fixed rate loans provide repayment certainty, which may suit investors who prefer predictable budgeting. Some investors use a combination of both, fixing a portion of their investment loan to lock in known costs while keeping a variable portion for flexibility. Your choice depends on your tolerance for rate changes, your cash flow needs, and your broader investment strategy.
Interest only repayments are commonly used on investment loans because they maximise tax deductions and improve cash flow in the short term. However, you are not reducing the loan principal, which means the debt remains unchanged over the interest only period. When the interest only term ends, repayments revert to principal and interest, which increases monthly costs. This structure works well if you are focused on portfolio growth and plan to sell or refinance before the principal and interest period begins.
Tax Implications and Deductibility
Interest on borrowings used to purchase an investment property is generally tax deductible, along with other expenses such as property management fees, repairs, insurance, and depreciation. However, the deductibility of negative gearing has changed for certain investors following the May 2026 Federal Budget. If you purchased an established residential investment property after 12 May 2026, losses from that property can only be offset against rental income or capital gains from residential property from 1 July 2027 onward, not against salary or wage income.
This means if your investment property runs at a loss, you can no longer reduce your taxable employment income by that amount under the new rules. Losses can still be carried forward and used to offset future residential property income, so the deduction is deferred rather than lost. The change does not affect investment properties purchased before Budget night, and it does not apply to new builds, which retain full negative gearing benefits and favourable capital gains tax treatment.
If you are using equity to fund a new build investment, you may be able to choose between the existing 50% capital gains tax discount or the new indexed cost base method when you eventually sell, depending on which is more favourable. Established properties purchased after Budget night will be subject to the new indexed cost base and minimum 30% tax on capital gains from 1 July 2027. Your accountant or financial adviser can model how these changes affect your after-tax return.
Risks and Considerations When Leveraging Equity
Using equity increases your total debt and exposes you to interest rate movements on a larger loan balance. If rates rise, your repayments on both your home and investment loans will increase if you are on a variable rate. You also take on the risks associated with property investment, including potential vacancy periods, unexpected maintenance costs, and the possibility that property values may not increase as anticipated.
If the value of either property falls, your loan to value ratio increases, which can limit your ability to refinance or access further equity in the future. Lenders reassess property values when you apply for new lending, so a decline in your Chadstone property's value could reduce the amount of equity available or require you to provide additional funds to proceed with a purchase.
Maintaining adequate cash reserves is important when holding multiple properties. Even with rental income, you should have accessible funds to cover periods where the property is vacant, or unexpected repairs are needed. An offset account linked to your home loan or a redraw facility on your investment loan can provide a buffer, though be mindful that redrawing funds used for non-investment purposes can complicate tax deductions.
Preparing Your Equity Release and Investment Loan Application
Lenders require a formal valuation of your Chadstone property to confirm the equity available. They will also request evidence of rental income for the proposed investment property, typically in the form of a rental appraisal from a licensed property manager. Your application will include payslips, tax returns, existing loan statements, and details of any other debts or financial commitments.
If you are purchasing in a location with lower rental yields or higher vacancy rates, lenders may apply a more conservative assessment or require a larger deposit. Properties in regional areas or those with unique features that limit rental appeal can be harder to finance using equity alone. Working with a mortgage broker who has access to investment loan options from banks and lenders across Australia can help you find a lender whose policies align with your property choice and financial position.
Some lenders offer rate discounts for larger loan balances or professional occupations, which can reduce your investment loan interest rate. Others provide flexibility around offset accounts, redraw facilities, or the ability to make additional repayments without penalty. Comparing loan features alongside interest rates ensures the loan structure supports your long-term strategy, not just your immediate purchase.
Call one of our team or book an appointment at a time that works for you to discuss how equity in your Chadstone property can be structured to support your next investment purchase.
Frequently Asked Questions
Can I use equity from my home to buy an investment property without selling?
Yes, you can access equity by refinancing your existing home loan or establishing a separate loan facility secured against your property. Most lenders allow you to borrow up to 80% of your property's value, and the released equity can be used as a deposit and to cover purchase costs for an investment property.
How much equity can I access from my Chadstone property?
If you borrow up to 80% of your property's value, your usable equity is the difference between 80% of the property's current value and your existing loan balance. For example, a property valued at $900,000 with a $500,000 loan could provide access to $220,000 in equity.
Is interest on equity release for investment property tax deductible?
Yes, interest on funds borrowed to purchase an investment property is generally tax deductible. However, for established residential properties purchased after 12 May 2026, losses can only be offset against residential property income from 1 July 2027 onward, not against salary or wages.
Do lenders count rental income when assessing my borrowing capacity?
Yes, but lenders typically only credit 80% of expected rental income to account for vacancy and maintenance costs. Your employment income, existing debts, living expenses, and loan repayments are also assessed to determine how much you can borrow.
What happens if property values fall after I use equity to invest?
If property values decline, your loan to value ratio increases, which can limit your ability to refinance or access further equity. Lenders reassess property values for new lending, so a drop in value may require additional funds or reduce the amount you can borrow.
