With Australian property prices projected to rise significantly over the next 12 months, existing homeowners have a unique opportunity to leverage their equity and enter the investment property market before the window closes.
The Perfect Storm: Why Now is the Time to Act
If you already own a home in Australia, you’re likely sitting on a substantial asset that has appreciated significantly over the years. But here’s what many homeowners don’t realize: that equity in your home could be the key to building long-term wealth through property investment—and the opportunity to act is narrowing rapidly.
The expanded 5% Deposit Scheme that came into effect on October 1st is already driving unprecedented demand in the property market. Independent analysts forecast property prices could rise by 3.5% to 9.9% nationally in 2026 alone, with first home buyer target areas seeing even higher growth. This surge in demand creates a compelling opportunity for existing homeowners to leverage their equity and secure investment properties before prices rise further.
At Sanford Finance, we’re already seeing savvy homeowners making this move. Here’s everything you need to know about using your home equity to build an investment property portfolio.
Understanding Home Equity: Your Hidden Asset
Before we explore how to use equity for investment, let’s clarify what it actually is.
Equity is simply the difference between your property’s current market value and what you still owe on your mortgage.
For example, if your home is currently valued at $750,000 and you have $400,000 remaining on your mortgage, you have $350,000 in equity.
But not all of that equity is accessible. This is where useable equity comes in.
Calculating Your Useable Equity
Banks are generally comfortable lending up to 80% of your property’s value. Your useable equity is calculated as:
Useable Equity = (Property Value × 80%) – Current Loan Balance
Using our example:
•Property value: $750,000
•80% of property value: $600,000
•Minus current loan: $400,000
•Useable equity: $200,000
This $200,000 is what you can potentially access to use as a deposit on an investment property.
The “Rule of Four”: How Much Can You Invest?
A useful guideline in property investment is the Rule of Four, which suggests your maximum investment property purchase price should be approximately four times your useable equity.
In our example, with $200,000 in useable equity, you could potentially purchase an investment property worth up to $800,000.
Here’s how the numbers work:
•Investment property price: $800,000
•Required 20% deposit: $160,000 (from your useable equity)
•Loan amount: $640,000
•Additional costs (~5%): $40,000 (also from useable equity)
•Total equity required: $200,000
This approach allows you to avoid Lenders Mortgage Insurance (LMI) on the investment property while keeping your existing home loan intact.
Why Property Prices Are About to Surge
The timing for this strategy has never been more critical. Here’s why property prices are projected to rise significantly over the next 12 months:
The 5% Deposit Scheme Effect
The expanded scheme has removed income caps and dramatically increased price caps across Australia. This has unleashed a wave of first home buyers into the market, creating intense competition for properties under the scheme’s price caps.
Real-world evidence is already emerging:
•Western Sydney properties jumped from $750,000 to $900,000 virtually overnight
•Mortgage brokers report “unprecedented demand” with buyers “literally queuing up”
•Properties in high-demand suburbs are receiving 100-150 enquiries per listing
Independent Forecasts vs. Government Projections
While Treasury modestly projects a 0.5% price increase over six years, independent economic analysis firm Lateral Economics forecasts:
•3.5% to 6.6% national price growth in 2026 alone
•5.3% to 9.9% in areas targeted by first home buyers
•Continued strong growth for several years afterward
Capital City Growth Projections
|
City
|
12-Month Projection
|
Current Monthly Growth
|
|
Perth
|
9-14%
|
1.6% (Sept)
|
|
Brisbane
|
8-12%
|
1.2% (Sept)
|
|
Adelaide
|
7-11%
|
1.0% (Sept)
|
|
Sydney
|
7-10%
|
0.8% (Sept)
|
|
Melbourne
|
5-8%
|
0.5% (Sept)
|
Source: Cotality September 2025 data, Lateral Economics projections
The Wealth-Building Advantage for Existing Homeowners
While first home buyers scramble to enter the market with minimal deposits, existing homeowners have a significant advantage: you can leverage your equity to secure investment properties in high-growth areas before prices surge.
Here’s why this strategy is so powerful:
1. Dual Property Appreciation
When you own two properties, you benefit from capital growth on both. If property prices rise by 8% over the next year:
•Your $750,000 home increases to $810,000 (+$60,000)
•Your $800,000 investment property increases to $864,000 (+$64,000)
•Total equity gain: $124,000
This is wealth creation through leverage—your initial $200,000 equity investment has generated returns on $1.55 million worth of property.
2. Rental Income Support
Unlike first home buyers who must service their entire mortgage from their income, your investment property generates rental income that helps cover the loan repayments.
For an $800,000 property in a high-demand area:
•Expected rental income: $650-750 per week
•Annual rental income: $33,800-$39,000
•Helps offset loan repayments and expenses
3. Tax Benefits Through Negative Gearing
If your investment property expenses exceed the rental income (which is common in the early years), you can offset this loss against your taxable income.
Example scenario:
•Annual rental income: $36,000
•Annual expenses (interest, rates, insurance, etc.): $45,000
•Net loss: $9,000
•If you’re in the 37% tax bracket, this could reduce your tax by approximately $3,330
This means the actual cost of holding the property is lower than it appears, while you benefit from capital growth.
4. Building Long-Term Wealth
Property investment is a long-term wealth-building strategy. Over a 10-20 year period, you benefit from:
•Capital growth on both properties
•Loan principal reduction through rental income
•Tax benefits that improve cash flow
•Potential to leverage further as equity builds
How to Access Your Equity: Three Main Options
1. Refinancing Your Home Loan
This involves replacing your existing home loan with a new, larger loan that includes the equity you want to access.
Advantages:
•Potentially access better interest rates
•Consolidate to one lender
•May reduce fees
Considerations:
•May incur break costs if on a fixed rate
•Application and valuation fees
•New loan terms
2. Top-Up Your Existing Loan
This increases your current loan amount without changing your existing loan terms.
Advantages:
•Simpler process than refinancing
•Maintain existing loan features
•Potentially lower fees
Considerations:
•Limited to your current lender
•May not get the best available rate
3. Home Equity Loan or Line of Credit
A separate loan secured against your property’s equity, often with flexible access.
Advantages:
•Flexible access to funds
•Only pay interest on what you use
•Keep existing home loan separate
Considerations:
•Typically higher interest rates
•Requires discipline to manage effectively
Strategic Timing: The Early Mover Advantage
The data clearly shows that those who act quickly will benefit most from the current market dynamics. Here’s why:
Price Inflation is Already Happening
Sydney mortgage broker James Watson told The Australian Financial Review that the scheme is “a sugar hit that will benefit the early movers but will disadvantage future buyers.”
He cited clients whose budgets of $1.15 million ended up at $1.3 million due to increased competition—and this is just the beginning.
The Compounding Effect
Every month you wait, property prices continue to rise. Consider this scenario:
Acting Now:
•Investment property: $800,000
•Required deposit (20%): $160,000
•Your equity covers this comfortably
Waiting 6 Months (assuming 4% growth):
•Same property now: $832,000
•Required deposit (20%): $166,400
•Additional equity needed: $6,400
•Plus you’ve missed 6 months of rental income and capital growth
Waiting 12 Months (assuming 8% growth):
•Same property now: $864,000
•Required deposit (20%): $172,800
•Additional equity needed: $12,800
•Plus you’ve missed 12 months of rental income and capital growth
The longer you wait, the more equity you’ll need and the less advantageous the investment becomes.
Choosing the Right Investment Property
Not all investment properties are created equal. Here’s what to look for in the current market:
1. High-Growth Areas
Focus on suburbs that are:
•Below the 5% Deposit Scheme price caps (high demand)
•Showing strong rental yields
•In areas with infrastructure development
•Attracting population growth
2. Strong Rental Demand
Look for properties with:
•Proximity to employment hubs
•Good schools and amenities
•Public transport access
•Features that appeal to renters (parking, outdoor space)
3. Realistic Cash Flow
Ensure you can comfortably service the loan even with:
•Potential vacancy periods
•Maintenance and repair costs
•Interest rate increases
•Property management fees
Risk Management: Protecting Your Investment
While using equity to invest in property can be highly rewarding, it’s essential to manage the risks:
1. Maintain a Buffer
Keep 3-6 months of expenses in reserve to cover:
•Vacancy periods between tenants
•Unexpected repairs or maintenance
•Interest rate increases
•Personal income disruptions
2. Don’t Overextend
Just because you can access equity doesn’t mean you should use it all. Conservative borrowing ensures you can weather market fluctuations and maintain financial stability.
3. Diversify Your Strategy
Consider:
•Different property types (house vs. apartment)
•Different locations to spread risk
•Mix of high-growth and high-yield properties
4. Professional Guidance
Work with experts who can help you:
•Mortgage broker – Find the best loan structure and rates
•Accountant – Optimize tax benefits and structure
•Financial planner – Ensure it fits your overall financial goals
•Property manager – Maximize rental returns and minimize vacancy
The Sanford Finance Advantage
At Sanford Finance, we specialize in helping homeowners unlock their equity and build wealth through strategic property investment. With over 19 years of experience and access to 40+ lenders, we can help you:
1. Maximize Your Borrowing Capacity
We’ll help you structure your loans to access the maximum useable equity while maintaining comfortable serviceability.
2. Find the Best Rates and Terms
With access to over 40 lenders, we can compare options to find the most competitive rates and favorable terms for both your home loan and investment loan.
3. Navigate Complex Scenarios
Whether you’re self-employed, have multiple income sources, or complex financial situations, we have the expertise to find solutions.
4. Optimize Your Tax Position
We work closely with accountants to ensure your loan structure maximizes tax benefits through negative gearing and other strategies.
5. Move Quickly
In a rapidly rising market, speed matters. We can fast-track your application to ensure you don’t miss out on opportunities.
Real-World Example: The Power of Equity Leverage
Let’s look at a realistic scenario:
Sarah and Michael’s Situation:
•Own a home in Brisbane valued at $850,000
•Current mortgage: $450,000
•Combined income: $180,000
•Equity: $400,000
•Useable equity: $230,000 (($850,000 × 80%) – $450,000)
Their Investment Strategy:
•Purchase investment property in high-growth Brisbane suburb: $920,000
•Use $184,000 equity for 20% deposit
•Use $46,000 equity for purchase costs
•Investment loan: $736,000
•Expected rental income: $750/week ($39,000/year)
First Year Results:
•Rental income: $39,000
•Loan interest (6.5%): $47,840
•Other expenses: $8,000
•Net loss: $16,840
•Tax benefit (37% bracket): $6,231
•Actual cost: $10,609
After 12 Months (assuming 10% Brisbane growth):
•Investment property value: $1,012,000
•Capital gain: $92,000
•Home value growth (8%): $68,000
•Total equity increase: $160,000
•Net position: $149,391 wealth increase (after actual costs)
This is the power of leverage in a rising market.
Taking Action: Your Next Steps
If you’re ready to explore using your equity to invest in property before prices surge further, here’s what to do:
Step 1: Get Your Property Valued
Understand your current equity position by getting an up-to-date valuation of your home.
Step 2: Calculate Your Useable Equity
Use the formula: (Property Value × 80%) – Current Loan Balance
Step 3: Assess Your Borrowing Capacity
Consider your income, expenses, and ability to service additional debt.
Step 4: Speak with a Sanford Finance Specialist
Book a free consultation to discuss your options, explore loan structures, and understand your investment capacity.
Step 5: Research Investment Locations
Identify high-growth areas that align with your budget and investment goals.
Step 6: Move Quickly
In a rapidly rising market, hesitation costs money. Once you’ve done your research and received professional advice, act decisively.
The Window is Closing
The expanded 5% Deposit Scheme has created a unique market dynamic that is already driving significant price growth across Australian property markets. While first home buyers scramble to enter the market with minimal deposits, existing homeowners have a powerful advantage: the ability to leverage substantial equity to secure investment properties in high-growth areas before prices surge further.
The data is clear: independent analysts project growth of 3.5% to 9.9% in 2026, with some areas potentially seeing even higher increases. Every month you wait, property prices rise, requiring more equity and reducing the investment’s attractiveness.
But this isn’t just about timing the market—it’s about time in the market. Property investment is a long-term wealth-building strategy that benefits from both capital growth and rental income over time. The sooner you start, the longer you have to build wealth through leverage.
At Sanford Finance, we’re here to help you navigate this opportunity with expert guidance, access to the best loan products, and a strategic approach tailored to your financial situation.
Don’t let this opportunity pass you by. Contact Sanford Finance today to discuss how you can unlock your home’s equity and build long-term wealth through strategic property investment.
Ready to unlock your equity and invest in property?
Ivo De Jesus is the founder and principal mortgage broker at Sanford Finance, with over 19 years of experience helping Australians build wealth through strategic property investment.
Disclaimer
This article is intended to provide general information only and does not constitute financial advice. Property investment involves risks and may not be suitable for everyone. You should consider your own financial situation and seek professional advice from a qualified financial adviser, accountant, and mortgage broker before making any investment decisions. Past performance is not indicative of future results. Sanford Finance is a credit representative and does not provide tax or financial planning advice.
