Harnessing the power of equity
INDUSTRY INSIGHTS
Loan Market Excel Finance Broker Adam Wallace-Harrison explores how to unlock your home equity to invest, renovate and build long-term wealth.
If you own property in Australia and have built up equity, you’re sitting on one of the most effective tools to grow your wealth — without needing to sell or save for years.
Let’s look at a practical example:
Property value: $1.5 million
Loan owing: $500,000
Equity: $1 million
Usable equity at 80% LVR: $1.2 million – $500k = $700,000
That $700,000 can be accessed through a loan split or equity release. Here are three smart ways to use it.
1. Renovate to increase property value
Renovations can significantly boost your property’s value, rental appeal, and long-term equity position.
Let’s say you use $150,000 of your available equity to upgrade the kitchen, bathrooms, or layout. A well-targeted renovation could increase your home’s value to $1.8 million or more — potentially unlocking even greater usable equity later.
If it’s your home, keep in mind this loan portion is not tax-deductible. But you are investing in a lifestyle upgrade and potentially improving future borrowing power.
If it’s an investment property, certain renovation costs may be depreciable or deductible, so speak to your accountant before starting.
2. Invest using equity
Another strategy is to use part of your equity—say $400,000–$500,000—to invest in income-generating assets like shares, ETFs, or even a second property.
Because the loan is used solely for investment, the interest is generally tax-deductible. You’re leveraging your existing asset to build a second stream of wealth without needing upfront capital.
This strategy is ideal for long-term investors looking to diversify beyond real estate, or for those aiming to grow their asset base while maintaining cash flow.
3. Implement a debt recycling strategy
Debt recycling is a structured way to convert your non-deductible home loan into tax-deductible investment debt over time while building your investment portfolio.
Here’s how it works:
Split your loan so you have a separate facility for investing.
Use equity to invest in income-producing assets.
Apply investment income (and surplus cash) to reduce your home loan.
Reborrow the paid-down portion to invest again.
Over time, you replace your home loan with deductible debt, grow your investment portfolio, and potentially reduce your tax bill.
Debt recycling suits investors with stable income, a long-time horizon, and a focus on wealth building over decades not months.
Final word
Equity is more than just a number on your statement — it’s a resource. Whether you’re upgrading your home, investing for the future, or restructuring your debt, unlocking that equity, smartly and strategically, can accelerate your financial goals.
Just make sure your strategy is as solid as the bricks and mortar it’s built on
A few essentials before you start:
Get professional advice A qualified financial adviser and mortgage broker can ensure your structure is tax-efficient and strategy-appropriate.
Don’t mix loans
Keep renovation, investment, and personal spending in separate loan splits.Plan for interest rates and risks
Leverage works best with a buffer and long-term view.
To get in touch with Adam call 1300 003 414 or email excel@loanmarket.com.au.
