How to Use Equity to Buy a Second Property

What Does It Mean to Use Equity?

Understanding the power of your home's value.

Equity is the difference between what your home is worth and how much you owe on your mortgage. When you've built up enough, you may be able to borrow against that value to buy another property.

Example Calculation:

Home value: $900,000

Mortgage owing: $420,000

80% of $900,000 = $720,000

$720,000 − $420,000 = $300,000 usable equity

That $300K might help cover the deposit for your next home or investment property. Learn more about calculating your usable equity.

Banks typically let you borrow up to 80% of your home's value — this helps determine your usable equity.

How Much Equity Do You Need?

Understanding deposit requirements for investment properties.

Most banks will want at least a 20–35% deposit on an investment property. That means if you're buying a $600K second home, you'll likely need $120–210K.

Check the latest LVR rules from the Reserve Bank — they can affect how much equity you need.

Good advisers (like me) can structure this correctly so you don't have to touch cash or disrupt your current mortgage setup.

Different banks have different policies — some might offer better terms for certain property types.

What Are the Steps?

Your roadmap to using equity effectively.

1. Get a property valuation — either a registered one or a desktop estimate

2. Work out your usable equity

3. Chat to a mortgage adviser (sooner the better)

4. Get pre-approved with the right structure for both loans

5. Start your search

Consumer NZ's guide to property investment can help you understand the broader picture.

Getting pre-approval before house hunting saves time and disappointment.

Can You Use Equity Without Selling?

Keep your home while building your portfolio.

Yes. Most people keep living in their original home and simply top-up or restructure their lending to fund the next deposit.

You're not selling — you're leveraging.

Learn more about smart refinancing strategies to make the most of your equity.

This approach lets you maintain your primary residence while building an investment portfolio.

What to Watch Out For

Key considerations for successful property investment.

• Banks look closely at your debt-to-income ratio (DTI)

• You'll need strong servicing (can you afford both loans?)

• Interest rates might differ from your first mortgage

Sorted's property investment guide can help you assess if you're ready.

A solid plan, with room for flexibility, makes all the difference.

Consider getting tax advice — property investment can have significant tax implications.

Calculate Your Investment Returns

Use our calculator to estimate potential returns on your investment property.

Before making any investment decisions, it's crucial to understand the potential returns and costs involved. Use our calculator below to estimate your investment property returns: