How to Use Equity to Buy Another House Before You Sell
If you own property in Australia, you may be sitting on more usable capital than your bank balance suggests. The catch is that equity is not cash until you either sell or borrow against it, and if you are mid-transaction, waiting for settlement can cost you the opportunity you needed the money for.
Equity is your property's current value less what you owe on it. Lenders will not let you borrow all of it. Depending on the lender and security, gross borrowing may be available up to approximately 65%–75% of the property value. Existing debt, capitalised interest, lender fees, valuation costs and legal costs are then deducted when determining the net funds available. Consumer rates start from around 7.49% p.a., subject to eligibility.
Can You Use Equity to Buy Another House Before Selling?
Yes. Eligible property owners can borrow against the equity in an existing property to fund a deposit, a purchase, renovations or other approved purposes before that property has sold. Rather than waiting for sale proceeds, the lender advances funds secured against the property and is repaid at settlement. The assessment focuses on:
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current market value of the security property
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your existing mortgage balance
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the resulting combined loan-to-value ratio
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how marketable the property is and how long a sale realistically takes
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a clear exit, usually the sale itself or a refinance
This is one of several bridging loan use cases. If you are buying and selling at the same time, read it alongside buying a house before selling yours, which covers how peak debt and end debt are calculated.
How Much Equity Can You Borrow?
There is an important difference between the equity you have and the equity you can use.
Total equity is simply your property's current value less your outstanding loan. If your home is worth $1,500,000 and you owe $600,000, you have $900,000 of equity on paper. Usable equity is what a lender will actually advance against, and it is always less. Two different benchmarks apply depending on the product:
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Many standard home loans are available up to 80% LVR without lender’s mortgage insurance, subject to the lender’s policy, borrower eligibility and property type. On a $1,500,000 property that is $1,200,000, less the $600,000 you owe, so around $600,000 of usable equity.
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Bridging and short-term lending is generally more conservative, commonly up to around 65% to 75% of value depending on the security, borrower and exit. At 75% that is $1,125,000, less $600,000, so around $525,000 available.
Lower LVRs improve your approval prospects and your pricing. Higher LVRs narrow your lender options and leave less room if the eventual sale price disappoints. Model your own position with the bridging loan calculator.
How to Access Equity in Your Home: Five Options
Bridging finance is one route, not the only one. Which fits depends on how quickly you need the funds, how long you need them for, and whether your income supports a full serviceability assessment.
1. Refinance or cash-out refinance
You refinance your existing home loan to a higher amount and take the difference as cash. Usually the cheapest ongoing option, because it is priced as a standard mortgage. The drawbacks are speed and scrutiny: it requires full income verification and can take weeks, and many lenders limit or question cash-out above a certain amount depending on the stated purpose.
2. Line of credit or equity loan
A revolving facility secured against your property that you draw on as needed. Flexible and useful for staged costs such as renovations, but it still requires a full serviceability assessment, and interest rates are typically higher than a standard mortgage.
3. Second mortgage
A second mortgage sits behind your existing first mortgage on the same property, so you keep your current home loan untouched. That matters if your first loan is on a rate you do not want to lose or has break costs attached. The second mortgagee ranks behind the first in a default, pricing is higher and the existing first mortgage terms may require consent. Some lenders will not permit a second mortgage or may impose conditions. Terms are typically short.
4. Caveat loan
A caveat loan is a short-term facility secured by lodging a caveat on the title rather than registering a full mortgage. It is fast, often days, and used where speed matters more than cost. It may be one of the more expensive options, depending on the lender, term, security and risk profile. Generally the shortest in term, and it can restrict dealings with the property while the caveat sits on title. Read our comparison of bridging loans versus caveat loans before choosing between them.
5. Bridging finance
Short-term lending secured against property and structured around a defined exit, usually a sale or refinance. It sits between a refinance and a caveat loan: faster and more flexible than a bank equity release because it is assessed on the asset and the exit rather than long-term serviceability, and cheaper and better secured than a caveat loan. It is the right tool when you have a clear settlement or refinance date to repay it from. See how bridging loans work.
None of these is universally best. If your circumstances satisfy bank requirements and there is sufficient time before the funds are required, refinancing may be the more cost-effective option. If you have a contracted sale in eight weeks and need funds now, bridging. If a bank has already declined you, see declined by lenders.
Using Equity to Buy an Investment Property
The same mechanics apply when the purchase is an investment rather than a home, but two things change.
First, assessment. Investment purchases are often structured through a company or trust, and the facility may be assessed on business or investment criteria rather than consumer lending rules. That can mean faster documentation but a different regulatory footing. See commercial bridging loans and bridging loans for property investors.
Second, tax. Whether interest on borrowed equity is deductible depends on what the funds are used for, not on which property secures the loan. Using equity from your home to buy an investment property is treated differently from using it to renovate your home. Get advice from a qualified accountant before structuring, because it is difficult to fix afterwards.
Why Borrowers Release Equity Before Settlement
Releasing equity ahead of a sale is almost always about solving a timing problem rather than a shortage of wealth. Common reasons:
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funding a deposit on the next property before the current one settles
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completing renovations before listing to improve the sale price
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injecting working capital into a business
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clearing a short-term ATO liability
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consolidating debt ahead of a refinance
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managing cash flow through a transition such as downsizing
If the pressure is a settlement date rather than a funding need, see covering settlement timing gaps instead.
How Releasing Equity Before Sale Works
Step 1: Property assessment
The lender reviews current market valuation, comparable recent sales, how liquid the suburb is, your existing mortgage position and a realistic sale timeframe. An independent valuation is required in most cases.
Step 2: Available equity calculation
Property value, multiplied by the lender's maximum LVR, less your existing mortgage, less a conservative buffer for interest and costs, gives the amount available. The buffer matters: if interest is being capitalised, the balance grows during the term and the LVR moves with it.
Step 3: Exit strategy
Most equity-before-sale facilities are repaid from the sale settlement. Where the sale is not yet contracted, lenders will look harder at marketability and pricing, and may want evidence of listing or a signed contract. A refinance can serve as a secondary exit but should not be assumed unless it has been properly assessed. See bridging loan exit strategies.
Step 4: Settlement and repayment
Funds are advanced, and the facility plus any capitalised interest and fees is repaid when the property settles. Any surplus proceeds are yours.
Scenario Melbourne
A Melbourne homeowner is preparing to sell and needs funds before settlement to secure their next property and finish pre-listing works.
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Property value: $1,500,000
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Existing mortgage: $600,000
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Equity on paper: $900,000
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Available on a 75% LVR bridging basis: $1,125,000 less $600,000 = $525,000
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Amount actually required: $200,000
Resulting position: total debt of $800,000 against a $1,500,000 property, a combined LVR of approximately 53%. Comfortably inside guidelines, which is where you want to be.
Interest cost: $200,000 over a 6 month term at 7.49% p.a. capitalised is approximately $7,490, added to the balance rather than paid monthly.
Exit: the property sells for $1,500,000. Settlement clears the $600,000 mortgage, the $200,000 facility and roughly $7,490 of capitalised interest, a total of about $807,490, leaving approximately $692,510 before agent and legal costs.
Illustrative only. Establishment, valuation and legal fees are additional. Actual pricing, LVR and available equity depend on the valuation and the lender's assessment of your exit.
Want to know what your usable equity actually is? Send us the property value, your current mortgage balance and what the funds are for, and we will come back with an indicative amount available and combined LVR. Request an assessment.
What Does It Cost to Access Equity Before Settlement?
Pricing depends on the loan amount, combined LVR, term, security position and risk profile. Indicative rates start from around 7.49% p.a. for consumer facilities and 8.5% p.a. for commercial, subject to eligibility.
Costs may also include establishment fees, valuation fees and legal documentation costs, and interest can often be capitalised rather than serviced monthly. Full detail on the interest rates and costs and fees pages.
Because the facility is short term, comparing the headline rate against a 30 year mortgage rate is the wrong comparison. The relevant question is what the total cost of the facility is against the value of having the capital when you need it.
Equity Bridging Versus a Bank Equity Loan
Traditional bank equity release generally requires a full income servicing assessment, extensive documentation, several weeks of processing, and in many cases for the sale to have completed first.
Bridging facilities are assessed primarily on asset value, LVR, marketability and exit clarity, over a short exposure period. That makes them suitable where timing is the binding constraint, or where income is harder to verify quickly, as it often is for self-employed borrowers and those using company or trust structures.
The trade-off is honest: you pay more per month for speed and flexibility, over a much shorter period. Compare consumer bridging loans and commercial bridging loans for how each is structured.
Risks and How We Reduce Them
Releasing equity before a sale means taking on debt against an asset whose final sale price is not yet known. The main risks:
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The property sells for less than expected. Your equity buffer absorbs the difference, so a conservative expected price is safer than an optimistic one.
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The sale takes longer than planned. Capitalised interest accrues, the balance grows and the LVR rises with it.
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The term expires before settlement. Extensions are not guaranteed and fees may apply.
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Enforcement. This is secured lending. If it is not repaid and no acceptable arrangement is reached, the lender can take action against the security.
Structuring against those risks means a conservative LVR, a realistic rather than hopeful sale price, an assessment of how liquid the suburb actually is, a defined exit timeline with a buffer, and a contingency if the primary exit slips. If the numbers only work on an optimistic valuation, that is a reason to borrow less, and we will say so.
Who Uses Equity Release Before Selling
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Business owners needing working capital against property security
See who we help for how each situation is assessed.
Where We Arrange Equity Bridging
Facilities are structured nationally across NSW, Victoria, Queensland, Western Australia and South Australia, including eligible regional markets, subject to valuation and liquidity assessment.
Bridging loans Sydney · Melbourne · Brisbane · Perth · Adelaide
Frequently Asked Questions
Can I use equity to buy another house before selling?
Yes. Equity in your existing property can be released to fund a deposit or purchase before that property sells, with the facility repaid from the sale proceeds or a refinance.
How much equity can I borrow?
On a bridging basis, generally up to around 65% to 75% of the property's value less your existing mortgage, depending on the security, borrower and exit. Standard bank lending commonly works to 80% of value before lender's mortgage insurance becomes a consideration.
What is the difference between equity and usable equity?
Equity is value less what you owe. Usable equity is the portion a lender will actually advance against, which is always lower because the lender retains a buffer against the security.
Can I unlock equity before my property settles?
Yes. Funds can be advanced before settlement, with repayment occurring when the sale completes.
Do I need a signed contract of sale to release equity?
Not always. Some lenders assess on marketability and a realistic sale timeline, while others require evidence of listing or a signed contract depending on the scenario and LVR.
What is the difference between a second mortgage and bridging finance?
A second mortgage sits behind your existing first mortgage and leaves that loan untouched. Bridging finance is a short-term facility structured around a specific exit event, and may sit as a first or second mortgage depending on the structure. Both are secured against property.
Is a caveat loan the same as a bridging loan?
No. A caveat loan is secured by a caveat on title rather than a registered mortgage. It is generally faster, shorter and more expensive, and it can restrict dealings with the property while the caveat remains.
How soon can I access equity?
Timing depends on valuation, documentation and the security position rather than a fixed queue. Where the security is straightforward, bridging facilities can be arranged considerably faster than a bank equity release involving a complex servicing assessment.
Do I need a valuation?
In most cases yes. An independent valuation confirms current market value and determines how much equity is available.
Can I release equity from an investment property?
Yes. Facilities can be structured against owner-occupied or investment property, subject to lender guidelines and LVR. Investment and commercial purposes may be assessed under different criteria.
Can I use released equity for renovations before selling?
Yes. This is a common use, funding cosmetic or structural improvements to lift the eventual sale price. See renovate before selling.
Can I access equity to pay a tax debt or business liability?
Yes. Short-term facilities are commonly used to clear ATO obligations or stabilise business cash flow ahead of a settlement or refinance.
Is the interest tax deductible?
It depends on the use of the funds rather than which property secures the loan, and it is not automatic. Seek advice from a qualified accountant before structuring.
Can I access equity if I am self-employed?
Often yes. Because bridging is assessed primarily on asset value and exit rather than long-term serviceability, it can suit borrowers whose income is harder to verify under standard bank policy.
What happens if my property does not sell in time?
Lenders assess realistic sale periods before approving. If the campaign runs long, options may include adjusting price or strategy, contributing additional funds, refinancing, or requesting an extension. None are guaranteed, which is why a time buffer belongs in the original structure.
Is releasing equity before sale regulated differently to a home loan?
It can be. Consumer-purpose facilities may fall under NCCP regulation, while facilities for business or investment purposes may be NCCP-exempt. The applicable framework depends on the borrower and the purpose of the funds.
More answers in our bridging loan FAQs.
Speak With an Equity Bridging Specialist
Every equity release scenario prices differently. Structure depends on the property value, your existing mortgage, the amount required, the combined LVR, your exit timeline and your borrower profile.
At Bridging Loans Australia we structure short-term bridging loans nationally through a panel of specialist lenders to help property owners access equity before settlement. Speak with our team to find out what is available against your property.