Line of Credit and Equity Loans for Investing
Turn Your Home Equity into Your Next Investment Deposit
A line of credit or equity loan lets you borrow against the equity you’ve built in your Perth or Mandurah home, giving you a flexible pool of funds to buy the next investment property without selling or saving from scratch. Andy explains the numbers, the structure, and what lenders actually approve when you apply.
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How Much Can You Actually Borrow Against Your Perth or Mandurah Home?
Before we explain what a line of credit is, here’s the number that matters: how much equity do you have, and how much of it can you borrow?
The formula is straightforward: (Property value × max LVR) – existing loan = available equity. Most lenders cap you at 80% LVR (loan-to-value ratio), sometimes 90% with lenders mortgage insurance. Here’s what the real numbers look like for three typical Perth scenarios:
| Property value | Existing loan | LVR cap | Total allowable borrowing | Available as line of credit |
|---|---|---|---|---|
| $500,000 | $300,000 | 80% | $400,000 | $100,000 |
| $650,000 | $380,000 | 80% | $520,000 | $140,000 |
| $750,000 | $450,000 | 90% (LMI) | $675,000 | $225,000 (minus LMI premium ~$9k) |
Servicing is the other gatekeeper. Lenders assess your income, debts, and living costs as if you’ve drawn the entire line of credit, even when the balance is zero. If you’re approved for $150,000 but only use $30,000, the bank still factors $150,000 of interest-only repayments (~$900/month at 7%) when they calculate what else you can borrow.
This often surprises investors: the line of credit shrinks your future borrowing capacity, even when untouched. No lender will approve you for more equity than you can service. If your household income is $120,000, you’ve already got $400,000 in investment debt, and you want a $200,000 line of credit on top, most banks will cap you at $100-130k to keep your debt-to-income ratio under 6:1.
Andy runs the full serviceability calculation in the first call so you know the realistic limit before you apply. The limit isn’t just about how much equity you have—it’s how much debt you can afford to carry when interest rates move.
What is a Line of Credit or Equity Loan And How Does It Work?
A line of credit (sometimes called a home equity loan or equity line) is a loan secured against the equity in your existing property. It works like a giant revolving credit limit: you're approved for a total amount—say $150,000—and you can draw on it whenever you need, up to that limit. You only pay interest on what you've actually used, not the full approved limit.
Interest Charged on Drawn Balance Only
You’re approved for $150,000 but only use $60,000? You pay interest on $60,000. The unused $90,000 costs you nothing except the annual facility fee ($200-400). Interest is usually variable and calculated daily on the drawn balance, charged monthly.
Reusable Funding—Pay Back, Draw Again
Draw $90,000 for an investment deposit. Six months later, deposit $40,000 back. Your available limit goes back up to $100,000. The line of credit replenishes as you pay it down, so one facility can fund multiple purchases over years.
Interest-Only Repayments Keep Cashflow Flexible
Most lines of credit are interest-only—you’re not required to pay down principal every month, though you can if you choose. The limit stays open for a set term (often 10-15 years), then either converts to principal-and-interest or must be refinanced.
Lenders Assess as if Fully Drawn
This is the catch: lenders assess your total serviceability as if the entire limit is drawn, even if you’ve only used $20,000 so far. A $150,000 line of credit counts as $150,000 of debt when you apply for your next loan, whether you’ve touched it or not.
Line of Credit vs Offset Account vs Redraw What's the Difference?
People often confuse these three. All let you ‘access equity,’ but the structure and flexibility differ. Here’s the breakdown:
| Feature | Line of credit | Offset account | Redraw facility |
|---|---|---|---|
| What it is | Separate loan with a credit limit you draw on | Transaction account linked to your loan; balance offsets interest | Extra repayments parked inside your loan that you can withdraw |
| Interest charged | Only on drawn balance | Loan interest reduced by offset balance | Loan interest reduced by extra repayments made |
| Reusable? | Yes—pay back, draw again | Yes—spend and deposit freely | Depends on loan; some lenders restrict or charge fees |
| Approval / serviceability | Assessed as fully drawn | No separate approval; part of main loan | No separate approval; part of main loan |
| Fees | Annual facility fee $200-400 | Often $10-15/month account fee, or free on premium packages | Usually free; some lenders charge $50-150 per redraw |
| Best for | Large, flexible investment funding | Reducing home loan interest while keeping cash liquid | Parking lump sums (tax refunds, bonuses) to save interest |
When to choose which:
- Line of credit suits investors buying multiple properties over 2-5 years who want a standing pool of capital they can tap repeatedly.
- Offset account suits owner-occupiers and investors who want to reduce interest without locking funds away, and who keep $20k-100k+ in accessible cash.
- Redraw suits borrowers who make extra repayments and occasionally need that money back, but not often—it’s less flexible than offset and less formal than a line of credit.
The line of credit is the most expensive and most flexible. You pay for the option to borrow even when you’re not using it. If you don’t need that ongoing flexibility, a simple investment loan with offset is usually cheaper.
How a Line of Credit Works in Practice The 5-Step Cycle
Step 1
You Apply and Get Approved for a Limit
Submit income docs, property valuation, and credit check. Lender assesses your equity and serviceability, then approves a limit—say $120,000. The limit sits there, unused, costing you the annual facility fee but no interest yet.
Step 2
You Find an Investment Property and Draw Funds
You’re buying a $450,000 unit in Rockingham; you need $90,000 for the 20% deposit. You transfer $90,000 from your line of credit to your transaction account, then to the seller’s conveyancer. Interest starts accruing daily on that $90,000.
Step 3
You Make Interest-Only Repayments
Every month you pay interest on the drawn $90,000 (around $525/month at 7%). You’re not required to pay down principal, though you can if you choose. The $30,000 you haven’t drawn yet costs you nothing in interest.
Step 4
You Pay Back Some (or All) of the Balance
Tax refund arrives, or you sell another asset. You deposit $40,000 back into the line of credit. Your drawn balance drops to $50,000; interest bill drops to ~$290/month. Your available limit goes back up to $70,000.
Step 5
You Draw Again for the Next Purchase
Twelve months later you buy a second investment property. You draw another $85,000 from the line (now total drawn = $135,000). The cycle continues. The line of credit acts like a permanent deposit reserve.
Why Most People Overestimate How 'Free' A Line of Credit Feels
Most people hear ‘line of credit’ and assume it’s free money sitting there forever. The discipline problem is real: I’ve seen families use 85% of a $200,000 limit on holidays and a car, then find themselves paying investment-loan interest rates (6.5-7.2% variable as at mid-2024) on purchases that have zero investment return. A line of credit is only a smart tool when you treat it like a mortgage—reusable, yes, but only for income-producing assets.
Three traps I see repeatedly in Mandurah and Perth:
- ‘I’ve got $150k available, so I can afford a $150k reno.’ The line of credit gives you access, but it doesn’t change your serviceability for the next loan. When you apply for investment property number three, that $150k facility counts as debt even if you’ve only used $40k. You might find you can’t borrow another dollar because the bank sees you as fully extended.
- ‘Interest-only means no repayments.’ Interest-only means no principal repayments. You still owe interest every month. On a $100,000 draw at 7%, that’s $583/month forever until you pay it down. If rent from the new investment property is $450/week, the loan is costing you more than the property earns—negative gearing, sure, but it only works if you’ve got the cashflow elsewhere.
- ‘The equity is mine; I earned it.’ True, but it’s also leveraged equity—it only exists because your property went up in value. If the Perth market pulls back 8-10% (as it did 2017-2019 in some suburbs), your $680,000 property becomes $620,000, and your $140,000 line of credit shrinks to $90,000 available. Lenders revalue periodically, and if your LVR blows out above 80%, they’ll freeze further drawdowns until you top up or the market recovers.
The line of credit is powerful when you’re disciplined and your investment strategy is clear. It’s expensive and risky when you treat it like an everyday offset account.
Why Investors Use Lines of Credit When They're the Right Fit
Speed at Auction or Off-Market Buys
You don’t wait 3-4 weeks for loan approval. Draw the deposit Friday, settle the deal Monday*. In competitive Perth markets (2021-2023 saw this a lot), speed wins properties.
Reusable Funding Across Multiple Purchases
Buy property one, pay back $50k, buy property two with that same $50k. You’re not applying for a new loan each time. One facility funds 3-5 purchases over a decade if managed well.
Interest-Only Keeps Cashflow Flexible
You’re not forced to pay down principal on the line of credit while the investment properties are building equity. The cashflow stays with you to cover holding costs, rates, or the next deposit.
Clean Separation of Owner-Occupied and Investment Debt
Your home loan stays quarantined. The line of credit sits separately, linked to investment purchases only, so your accountant can track deductible interest without blending personal and investment expenses.
Common Questions About Lines of Credit and Equity Loans For Investing
Yes. If you own an investment property with enough equity, you can secure a line of credit against it the same way you would against your owner-occupied home. Lenders assess it at investment-loan LVR caps (usually 80%), and you’ll pay investment-loan interest rates. The process and structure are identical; the property securing the line of credit just happens to be tenanted rather than owner-occupied.
Most lenders set a minimum limit of $50,000 (some go as low as $20,000 with regional banks). The maximum depends on your equity and serviceability, but caps typically sit around $500,000-$1,000,000 for residential lines of credit. Above that, lenders usually want commercial or SMSF structures. For most Perth investors, the sweet spot is $80,000-$250,000—enough for 1-3 deposits without over-leveraging.
At application, yes—lenders want to know the funds are for investment purposes (they price and assess accordingly). Once approved and the facility is open, you can draw funds without explaining every transaction, but the loan contract usually states ‘investment purposes only.’ Using it for personal spending (holidays, car, renovations to your own home) can breach the loan terms and risks the lender freezing the facility. For tax reasons, keep it clean: investment purchases only.
Yes, almost always. Lines of credit are variable-rate loans, so there’s no break cost for paying down or paying off the balance early. You can deposit $100,000 back into the facility on Monday and your interest bill drops immediately. Fixed-rate break costs don’t apply here. The only ‘penalty’ is opportunity cost: once you pay it down, you free up the limit, but if you later decide not to use it, you’ve been paying the annual facility fee for nothing.
Lenders typically revalue your security property every 2-3 years, or when you apply to increase the limit. If your LVR climbs above the agreed cap (say, 82% when your approval was for 80%), the lender will freeze further drawdowns until you either pay down debt or the property value recovers. They won’t force you to repay what you’ve already drawn (unless you default), but the unused portion of your limit becomes inaccessible. This happened to a lot of Perth investors in 2017-2019 when the market softened 8-12% in some suburbs.
Yes, if the borrowed funds are used to purchase an income-producing asset. Interest on money drawn to buy an investment property, pay for investment-property repairs, or cover holding costs (rates, strata) is deductible. Interest on money used for personal expenses (holiday, new car, owner-occupied home reno) is not deductible. Keep your line of credit quarantined for investment purposes and the ATO has no issue. Mix it with personal spending and you’ll need an accountant to apportion the interest—messy and risky. Your broker and accountant should work together on the structure upfront.
Not exactly ‘convert,’ but you can refinance your home loan and split it into two facilities: one standard principal-and-interest loan for your remaining home debt, and one line of credit for the available equity. For example, $600k property, $300k owing—you refinance to a $300k P&I home loan + $180k line of credit (at 80% LVR). The existing loan pays out; the new structure gives you the revolving credit limit. This is common when investors want to keep their home loan separate and access equity without touching the offset or redraw on the owner-occupied side.
Application to approval: 5-10 business days for straightforward scenarios (PAYG income, clear equity position, no credit issues). Settlement: another 10-15 business days once you’ve signed documents. If you’re refinancing an existing loan at the same time, add another week. Total elapsed time is typically 3-4 weeks. Once the facility is live, drawing funds takes 1-2 business days (internet banking transfer), so the ongoing speed is the real advantage.
No. You only pay interest on the drawn balance. If you’re approved for $150,000 but you’ve only used $60,000, you pay interest on $60,000. The unused $90,000 costs you nothing except the annual facility fee ($200-400), which you pay regardless of whether you’ve drawn $1 or $150,000. This is why the annual fee feels steep when the line sits idle—you’re paying for the option to borrow, not the borrowing itself.
Yes, and this is a common strategy for active investors. You might have one $120k line of credit against your Mandurah home, and another $90k line against your first Baldivis investment property. Each facility is secured separately, assessed separately, and drawn independently. The downside: each one eats into your total serviceability, and each one carries its own annual fee. Most investors find 1-2 lines of credit is the practical ceiling before the fees and servicing limits make further borrowing unviable.
Experience You Can't Shortcut Broking Since 2000
Andy’s been arranging investment loans in Perth and Mandurah since 2000—back when most WA families thought negative gearing was an obscure tax loophole. He’s seen three full property cycles, watched lenders tighten and loosen investor policy five times, and worked with enough accountants to know which structures cause problems at tax time and which save money long-term.
He picks up the phone when the valuation comes back low, when your accountant wants the loan split differently, or when the rental appraisal doesn’t match what the lender’s model says the property should rent for. You get his mobile, and he answers. Not next business day—when you call.
No franchise, no junior processing your file while the senior broker chases the next lead. You deal with Andy from the first structure conversation through to settlement and beyond. Most of his investment clients come back for the next purchase, the refinance, the equity release, because the work doesn’t stop at settlement—he keeps checking that the loan still fits as your portfolio grows.
If you want a line of credit explained line by line, structured around your accountant’s advice, and arranged by someone who’s been comparing lenders since before online applications existed, call Andy.
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Reviewed by
Credit Representative & Mortgage Broker
The information on this page has been reviewed for accuracy by Andy Iriks, a Credit Representative & Mortgage Broker at Wanna Finance. It is general information only.
