Using equity in your Australian home to buy again

By Gregg Odlum, Senior Finance Broker at Hypothèque · Updated 2026-11-05 · 6 min read

If the home you left in Australia has grown in value, it may already hold your next deposit. You just have to draw on it carefully, and from overseas that takes a bit more planning.

The short version

Equity is your property's value minus what you owe. Usable equity is usually what's left after keeping the loan at or below 80% of the value [1].
You typically access it by topping up or refinancing your existing loan, or setting up a separate loan split [1].
Lenders still need you to afford both loans on your foreign income, tested at least 3 percentage points above the loan rate [2].
Interest is tax-deductible based on what the borrowed money is used for, not which property secures it [3].
If you're a foreign resident when you sell your former home, you generally lose the main residence CGT exemption [4]. Plan the order of moves carefully.

Equity versus usable equity

The two numbers are not the same, and the gap surprises a lot of people.

CommBank's worked example makes it clear [1]:

Step	Amount
Home value	A$750,000
Loan still owing	A$400,000
Total equity (value minus loan)	A$350,000
80% of value	A$600,000
Usable equity (80% of value minus loan)	A$200,000

So on paper you "own" A$350,000 of the home, but a lender will usually only let you tap A$200,000 of it without lenders mortgage insurance [1]. Some lenders will go above 80%, but you'd typically pay LMI, and expat borrowers often face lower limits to begin with.

The valuation is the lender's, not yours

Your usable equity hinges on the bank's valuation, not the agent's appraisal or what the neighbour got at auction. Valuers are conservative. If your Adelaide home is valued at A$700,000 rather than the A$750,000 you hoped, usable equity in the example above falls from A$200,000 to A$160,000. Ask for a valuation early, before you start house-hunting.

What equity can and can't do

Equity can replace your deposit. It doesn't replace your income.

To release equity, the lender looks at your income, your debts and the property's value [1]. You'll be borrowing more in total, so the bank must be satisfied you can service the existing loan plus the new borrowing, using the 3 percentage point buffer APRA expects [2]. That means your foreign salary goes through the usual discounting and currency adjustments.

There's also a system-level limit. APRA caps the share of new lending banks can do at a debt-to-income ratio of six or more at 20% [2]. Equity strategies stack up debt quickly, so if your total borrowing heads towards six times your assessed income, expect closer scrutiny.

How to structure it

Option 1: top-up or split on your existing loan

You increase your current loan or create a separate split and use that money as the deposit and costs for the next property. CommBank notes you generally access equity by refinancing or topping up, and the new investment loan is often with the same lender [1].

Option 2: refinance to a new lender

If your current lender's expat policy is tight, moving the existing loan to a lender that suits your overseas income may release more equity or give a better structure. You'll face discharge and setup costs, and another full assessment.

Option 3: a separate loan for the new purchase

The new property gets its own loan, secured against itself, with the equity split covering the deposit. Keeping each property's lending separate tends to make things simpler when you later sell one or refinance.

Cross-collateralisation: know the term

Some lenders will secure a new loan against both properties at once. It can look convenient, but it ties the properties together. Selling one or changing lenders may need the bank's sign-off on both. Ask any lender exactly what each property will secure before you sign.

Tax: the purpose test

The ATO's rule is simple and strict: interest is deductible based on what you use the borrowed money for, not which property it's secured against [3].

Equity used for an investment property: interest on that split is generally deductible against the rental income.
Equity used to buy a new home to live in: not deductible, even if your rental property is the security [3].
Mixed loans: if one loan funds both investment and private spending, you have to apportion interest for the life of the loan, and you can't just pay down the private part first [3].
Redraws: using redraw for a car or a holiday turns that portion into private debt [3].

That's why many investors keep separate splits for each purpose. It keeps the records clean for the ATO and for you.

Remember the 2027 change too. For established homes bought after 7:30pm AEST on 12 May 2026, rental losses stop offsetting wages from 1 July 2027, while new builds keep negative gearing, and properties held at budget night are grandfathered [5]. If you're using equity to buy, get advice on how a new or established property would be treated.

The CGT catch for expats

Here's the one that bites Australians overseas. If you're a foreign resident for tax purposes when you sign the contract to sell, you generally can't claim the main residence exemption on your former home, even for the years you lived in it [4]. There's a narrow exception called the life events test, which covers foreign residency of six years or less combined with events like a terminal medical condition, the death of a spouse or child, or a relationship breakdown [4].

Why this matters for an equity strategy: if your plan is "borrow against the old home now, sell it later", the timing of that sale relative to your tax residency can change the tax bill a lot. Talk to a tax adviser before you lock in the plan, not after.

The order of play

Get a current valuation of your existing property from your lender.
Calculate usable equity using the 80% rule, then subtract a buffer for costs.
Check serviceability on your foreign income for both loans together.
Decide the structure: top-up, refinance or separate loan, and avoid mixing purposes.
Check the tax angle for the new purchase (new versus established) and for any future sale of the old home.
Keep a cash reserve. CommBank suggests a reserve fund to cover repayments on both loans through vacancies or a tenant not paying [1]. An offset account can hold it while still reducing interest on the linked loan [6].
Get pre-approval, then start looking.

Using the equity in your Australian home: buying again without a cash deposit