How Much Equity to Buy a Second Property?

The short answer

To buy a second or investment property in Australia using your home's equity, you generally need enough usable equity to cover the new property's deposit plus its purchase costs (stamp duty, LMI, fees). Lenders typically calculate usable equity as 80% of your home's value minus your current loan balance. Anything above 80% of the property's value is usually off-limits without paying Lenders Mortgage Insurance (LMI). As a rough rule, you want usable equity of around 20-25% of the new property's price to fund the deposit and costs without dipping into cash savings.

How it works in Australia

Your equity is your property's value minus what you still owe, but lenders don't let you borrow against all of it. Most cap borrowing at 80% of the home's value before LMI kicks in, so your usable equity is:

Usable equity = (Current property value × 0.80) − Outstanding loan balance

This usable equity can act as the deposit (and cover upfront costs) on a second property, often via a loan top-up or a separate split against your existing home, rather than a cash deposit (money.com.au). Keeping the new loan at or below 80% LVR avoids LMI on the investment loan too.

A few Australian specifics to keep in mind:

• First-home-buyer schemes don't apply. The First Home Guarantee (5% deposit, no LMI) and most stamp-duty concessions are owner-occupier, first-home-buyer only, and the First Home Guarantee guarantee ends if you convert the home to an investment (Housing Australia). The First Home Super Saver $50,000 lifetime cap likewise only helps first homes (ATO). So a second-property buyer pays full stamp duty and, in some states, higher investor/foreign surcharges.
• Stamp duty applies on the new purchase at standard rates. In NSW, transfer duty on an $800,000 property is $30,412 (no first-home exemption) (Revenue NSW).
• LMI is charged when LVR exceeds 80% on either loan: roughly 1.79% of the loan at 90% LVR, and $0 at 80% or below (Moneysmart).

Worked example

Say your home is worth $900,000 and you owe $400,000.

Step	Calculation	Result
80% of home value	$900,000 × 0.80	$720,000
Less current loan	$720,000 − $400,000	$240,000 usable equity

Now you want to buy an $800,000 investment property in NSW. The funds you need at settlement:

Cost	Amount
20% deposit	$160,000
NSW stamp duty	$30,412
Conveyancing + registration (approx.)	~$2,000
Total upfront	~$192,412

Your $240,000 usable equity comfortably covers the ~$192,000 needed, so you could fund the whole purchase from equity, with no cash deposit and no LMI on either loan (both stay at or under 80% LVR). If the property cost more, or your usable equity were smaller, you'd either top up with cash savings or accept a higher LVR and pay LMI.

On the new $640,000 investment loan (80% of $800,000) at 6% over 30 years, repayments would be around $3,837/month. (A standard $600k loan at the same rate is ~$3,597/month, for reference.)

Model this in True Loan

True Loan is free and runs entirely in your browser. To check your own numbers:

1. Your existing home. Set the property value and current loan balance. The equity / LVR timeline shows your projected value, equity and LVR over time, so you can see when you cross the 80% line and free up usable equity.
2. The new property. Open a second scenario with the investment property's price as the loan, set the deposit, and switch the state to see stamp duty and any LMI in the upfront-costs panel, plus total funds required at settlement.
3. Add ongoing costs (council rates, insurance, strata, land tax, property management) to see the full holding picture.
4. If you'll keep cash in an offset account, use the dedicated Offset balance input. If you'll make extra repayments, use the separate Extra repayment ($/month) input. They behave differently.

Want to weigh borrowing more against your home versus a smaller purchase? Put both side by side at trueloan.app/compare.

See also: How to calculate usable equity, What is LVR and how to calculate it, and How much equity will I have in 10 years?.

Common questions and mistakes

• "My equity is $500k, so I can use all of it." Only usable equity (the gap up to 80% LVR) is accessible without LMI. The rest stays locked in.
• "I'll get the first-home stamp-duty discount." Not on a second property. Those concessions are first-home-buyer, owner-occupier only.
• "Using equity means no deposit needed." You still fund a deposit; it just comes from your home's equity instead of cash. Both loans together raise your total debt and repayments.
• "LVR is only about the new loan." Lenders look at the combined position across both securities; pushing either above 80% can trigger LMI.
• Forgetting land tax. Investment properties attract land tax in most states once you're over the threshold, so model it as an ongoing cost.

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Figures here are estimates for the 2025-26 financial year and general information only, not financial or credit advice. Always confirm current rates and rules with your state revenue office, the ATO, Moneysmart, and Housing Australia.