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Subscribe On AndroidThis snippet is from one of our previous episodes: Q&A – How to Avoid Poor Loan Structure
Got equity in one property and wondering if you can use it to buy two more? You’re not alone!
In this TPC Gold snippet, Bryce and Ben answer a listener’s question about using equity as a deposit across multiple investment properties — and why the way you structure your loans can make or break your long-term strategy.
They unpack:
- How you can use one property’s equity to help fund more than one purchase
- Why standalone lending (not cross-securitisation) matters
- The dangers of “lazy” loan structuring from brokers and banks
- Why flexible splits now can mean greater borrowing power later
- A hidden tip on how loan-to-value ratios (LVRs) can boost your serviceability
It’s a must-listen for anyone in the accumulation phase who wants to keep their strategy clean, flexible and growth-ready.
Tapping into Equity? What to Watch Out For!
Setting up your investment loans correctly from day one is critical — especially if you’re planning to build a multi-property portfolio.
Book a free consultation with Empower Wealth’s Mortgage Broking team to check your structure, protect your borrowing power and avoid costly traps like cross-securitisation.
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If You Enjoyed TPC Gold | Can I Use One Property to Fund Two More? You Might Also Like:
- TPC Gold | Living Off Equity: Smart Strategy or Risky Move?
- TPC Gold | Can You Use Your IP’s Equity to Pay Off Your Home Loan Early?
- TPC Gold | Lenders Mortgage Insurance (LMI): What It Is and When You Need It
Transcript
Bryce Holdaway
Alright, so we’ve got another question here from Shanki, Ben. Regarding loan structure, can I use the equity from one property to pay the deposit for two separate investment properties? And the last part of the question, is it similar to collateral?
Ben Kingsley
So the answer to that is yes, you can and you don’t have to cross-securitise to do that. In fact what you could do depending on how much visibility you want to have on your loan splits… So let’s say, some people in Sydney who might have a lot of equity; let’s say they’ve got $300,000 or $400,000 worth of equity and they want to get that out as a lump sum. They could potentially use that for four properties, subject to them having strong enough income to get the borrowing power to buy all of those properties.
Now some might choose to just have that as one loan split, knowing that it’s a deposit for each of those properties, but others potentially like to split it out to say maybe the 25%. So it’s the 25% because the property itself is going to have 80% against it, and that makes up the 105% that they’re going to borrow to get that particular property.
So the answer to that is yes, you can. And depending on how you want your investment savvy broker to work with you, they will sort of make some recommendations on the different types of ways in which you can structure it. But the fundamental thing is that it would be a separate loan structure from your non-deductible home, if it’s your home you’re releasing it from. And you might split that out again into a couple of extra splits, but that’s how it’s done.
Bryce Holdaway
Because that came from the fact that one of the sins we talked about in the webinar, Ben, was to not cross-securitise your lending. You gotta do it standalone. So it’s a good question. It’s a variation. We’re still doing standalone, but you can see where Shanki was going with that because it can be confusing.
Ben Kingsley
Because what a lot of lazy brokers and bankers do, okay, because it gets a little bit more complex… in some cases you might have two or three loan splits. Now it doesn’t matter what they’re secured against, but there’s two or three loans, and the purpose of that money might have been for 1 Smith Street, right? And it doesn’t matter that it’s come from 1 Jones Street and 1 Errol Street and 1 Johnson Street. It doesn’t matter if there’s a split from that. But that just means that that property might have three or four loans that you’ve got to remember the purpose of that money was for that property. But the lazy ones, the ones who think “I don’t want to teach my clients how to do this” will just go, let’s combine them all together and let’s cross securitise them. And then it’s nice and easy for you. So that investment property just has one loan and that’s all you need to worry about. For me, I think you’re robbing the customer of flexibility, you’re robbing the customer of future potential, you’re robbing the customer of getting extra borrowing power. All of that.
Bryce Holdaway
The money they pay in LMI.
Ben Kingsley
Yeah, well, that’s right. If it’s global and they go over that 80% and in some cases, as we’re seeing now, some lenders, and this is a new bit of gold… is some lenders are servicing using their servicing calculator based on LVRs. So if you can get that LVR down to 70 or even below 60, their servicing calculators are more relaxed, which means you can borrow more money. So again, if you’re in the accumulation phase and you can control a bigger asset, then the reality is there’s going to be more in your back pocket.
Now that always still comes back to the one fundamental thing, and that is the income to support it and not just for today but into the future. We cannot stress enough that our podcast is not about gung-ho, must get out there, must do everything now. It’s about sensible, strategic, well thought out, tailored money management solutions and then execution and implementation.
Bryce Holdaway
We’re not get rich quick Ben. We’re get rich safe.
Ben Kingsley
We are.
Bryce Holdaway
So there you go folks.
