Using Equity to Buy an Investment Property: Should You Stay with Your Current Lender or Switch?

If you are already a homeowner and have built up some equity in your property, you might be thinking about using that equity as a deposit for your next big move: buying an investment property. It’s a smart strategy, and many Australians are doing exactly that to build long-term wealth through property.

But here’s the big question: Should you stay with your current lender or move to a new one?Let’s break down the two main options to help you understand the process, the pros and cons, and how to make the right decision for your financial future.

Unlock the power of your home equity to invest in property and grow your wealth.

What Is Equity and How Can You Use It?

Equity is the difference between your property's current market value and the amount you still owe on your home loan. Lenders generally allow you to borrow up to 80% of the property’s value without needing to pay Lenders Mortgage Insurance (LMI).

Example:

• Current Property Value: $800,000

• Existing Loan Balance: $450,000

• 80% of Property Value: $640,000

• Usable Equity: $640,000 – $450,000 = $190,000

You can use this equity as a deposit for an investment property by either refinancing your home loan to a new lender or accessing a top-up with your current lender.

Option 1: Stay with Your Current Lender

This is the most straightforward option: you keep your home loan with your current lender, access your available equity through them, and take out the investment loan with the same lender.

How it works:

• Your lender values your property and calculates the available equity.

• You apply for a top-up or a new split loan to access part of that equity.

• That equity becomes your deposit for the investment property.

• You then apply for a new loan with the same lender to finance the rest of the investment property purchase.

Pros:

• Simpler and faster process (no need to refinance).

• No discharge fees or lender switching costs.

• Familiarity with your current bank’s processes and policies.

• May retain package discounts, offset accounts, and other features.

Cons:

• Your current lender might not offer the best rates for investment loans.

• Some lenders have stricter policies when it comes to cash-out or using equity for investment purposes.

• Less flexibility in how loans are structured.

Option 2: Switch to a New Lender

Switching gives you access to a broader range of products, potentially better rates, and more flexible loan structures. There are two ways you can approach this:

Option 2.1: Keep Your Home Loan with Current Lender, and Get the Investment Loan with New Lender

This means you don’t change anything with your current mortgage, but you apply for a separate investment loan with a new lender.

How it works:

• You request an equity release or cash-out from current lender.

• Once the funds are released, you use them as a deposit.

• You apply with new lender for the investment loan to cover the remaining purchase price.

Pros:

• You maintain your existing mortgage structure if you're happy with it.

• You get the chance to shop around for a better investment loan product.

Cons:

• Two different lenders to manage means double the paperwork and accounts.

• Some lenders are reluctant to release large equity amounts for use with another bank.

• If you max out your borrowing power, two banks may not assess your situation holistically.

Option 2.2: Refinance Your Home Loan from Current Lender to New Lender, and Also Apply for the Investment Loan with New Lender

This is a full refinance and consolidation approach, both your home and investment loans end up with the new lender.

How it works:

• You refinance your existing mortgage with new lender.

• At the same time, you release equity during the refinance process (this becomes your deposit).

• You apply for a new investment loan with new lender to complete the purchase.

Pros:

• Potential for lower interest rates and better product features.

• All loans with one lender mean easier management.

• You might be eligible for refinance cashback offers and promotional deals.

• Often better structuring options, such as multiple offsets or fixed/variable splits.

Cons:

• Longer process due to refinancing paperwork, valuations, and credit assessment.

• You may incur break fees if you're on a fixed rate with current lender.

• Lender policies differ some may not approve full cash-out or assess your capacity conservatively.

Which Option is Right for You?

Here are a few guiding questions to help you decide:

• Are you happy with your current lender’s rates and service?

• Do you want to simplify or consolidate your loans?

• Is flexibility or access to new features (like offset accounts or redraw) important?

• Would you benefit from cashback offers or interest savings over time?

There’s no one-size-fits-all answer. The best option depends on your borrowing capacity, long-term goals, and current lender policies.

Work with a Mortgage Broker to Make It Easy

The good news? You don’t have to make this decision alone. A mortgage broker can:

• Compare dozens of lenders on your behalf

• Explain how much equity you can access

• Help you structure your loans for tax and cash flow efficiency

• Guide you through the paperwork from start to finish

Whether you’re staying or switching, using equity to buy an investment property is a big step toward building wealth — and done right, it can set you up for long-term financial success.

Ready to explore your options?

Contact me today for a free equity assessment and investment loan strategy session. Let's work out the best way to fund your next property move — with confidence and clarity.