How to Boost Your Home Equity and Fast-Track Your Next Investment Property

Building a property portfolio often begins with one smart move — using the equity in your first property to fast-track your next investment. Many Australians find it challenging to buy their first home due to the large deposit required. However, once you’ve overcome that hurdle and built some equity in your first property, you’re already in a strong position to move toward your second one.

Your accumulated equity can often serve as the deposit for your next purchase, allowing you to grow your property portfolio without needing significant new savings. Depending on your income, living expenses, and remaining mortgage balance, you may be able to refinance or access additional funds by using your home as collateral.

There are several strategies to actively increase the equity in your property beyond just making regular mortgage payments or waiting for the property market to appreciate in value. In this article, we’ll outline five essential moves to help you boost your property equity faster and confidently take the next step toward your second investment property.

Restructure Your Loan Repayments to Grow Equity Faster

If you want to boost your property equity and reach your next investment goal sooner, start by reviewing how you repay your mortgage. Your equity represents the difference between your property’s market value and the remaining loan balance. The faster you reduce your loan, the more equity you build — giving you greater borrowing power for your next property purchase.

Most borrowers make twelve monthly repayments each year. However, by switching to a fortnightly repayment schedule, you’ll make twenty-six half-payments instead — equal to thirteen full payments annually. That single extra month of repayments can shave years off your loan term and save thousands in interest.

Because most lenders calculate interest daily, more frequent repayments reduce your loan balance sooner and minimise the total interest charged over time. This simple adjustment can help you grow equity faster, strengthen your financial position, and make your next investment property purchase achievable much sooner.

 Add Value Through Strategic Renovations and Smart Improvements

One of the fastest ways to grow property equity is by increasing your home’s market value through targeted renovations and improvements. Since equity represents the gap between your property’s value and what you owe on the loan, every dollar added to the property’s worth can directly strengthen your financial position and borrowing power for your next investment.

Not all renovations deliver the same return. Focus on upgrades that add genuine value and enhance appeal to future buyers or tenants. Some of the most effective improvements include:

• Fresh painting to instantly brighten interiors and boost visual appeal.
• Landscaping that enhances curb appeal and creates an inviting first impression.
• Bathroom and kitchen upgrades to modernise key spaces and improve functionality.
• Flooring replacement to refresh the home’s overall look and comfort.
• Roof renewal for improved safety, efficiency, and presentation.
• Added storage solutions that increase practicality, especially in compact homes.

Before starting any renovation, evaluate the potential return on investment. The goal is to maximise equity growth without overcapitalising. Thoughtful, well-planned improvements can help you build property equity faster, strengthen your borrowing power, and position you for your next property purchase with greater confidence.

Use an Offset Account to Reduce Interest and Build Equity Faster

An offset account is a powerful tool that can help you reduce interest costs and build property equity more efficiently. It operates like a standard transaction or savings account, but the balance in your offset account is directly linked to your home loan. Instead of earning interest, the money in your offset account is used to reduce the amount of your loan on which interest is calculated.

For example, if your home loan balance is $500,000 and you hold $80,000 in your offset account, you’ll only be charged interest on $420,000. This effectively lowers your interest payments and helps more of your regular repayments go toward reducing the loan principal rather than servicing interest.

Over time, this approach can shorten your loan term, save thousands in interest, and increase your property equity faster — all without changing your lifestyle or repayment schedule. For investors looking to fast-track their next property purchase, maintaining a healthy offset balance can make a substantial difference in borrowing capacity and long-term wealth creation.

Make Extra or Lump-Sum Payments to Accelerate Equity Growth

Making additional repayments, whether regular top-ups or occasional lump-sum contributions, is one of the most effective ways to increase property equity. Every extra dollar you pay above your minimum home loan repayment directly reduces the principal, cutting down the interest charged and shortening the life of your loan.

For example, if you receive a work bonus, tax refund, or rental profit from another property, consider directing a portion of it toward your mortgage. Even small, consistent extra payments can add up over time, saving you thousands in interest and helping you build equity at a much faster rate.

Many lenders also allow flexible repayment options, letting you increase your repayment amount or make lump-sum payments without penalty. Before making large additional repayments, however, check your loan terms to ensure there are no restrictions or fees.

By making extra contributions whenever possible, you’ll steadily reduce your debt, grow property equity faster, and strengthen your financial position to fund your next investment property sooner.

Is Interest on Your Home Equity Loan Tax Deductible?

Whether the interest on your home equity loan is tax-deductible depends entirely on how you use the borrowed funds. In most cases, interest on a home equity loan is deductible only when the funds are used to purchase or improve an investment property that generates rental income.

However, if you use the equity from your existing home to buy another property for personal use, such as your new principal residence, the interest is not tax-deductible — even if you rent out your first home. The key factor is the loan’s purpose: the borrowed funds must be used to acquire or produce income-generating assets for the interest to qualify as a deduction.

For example, consider Bob and Jane, who take out a $400,000 equity loan against their first property, valued at $1 million, to buy a new home. Their first property still has a $250,000 mortgage, and they choose to rent it out instead of selling. While the interest on the $250,000 loan tied to the now income-producing property is deductible, the interest on the $400,000 loan used to purchase their new home is not. This is because the second loan was not used to generate income, even though it’s secured against their rental property.

Understanding the distinction between deductible and non-deductible debt is crucial for property investors looking to structure loans efficiently and maximise tax benefits.

What’s Next

Building home equity is one of the most powerful ways to grow wealth and fast-track your next investment property. By restructuring your repayments, using an offset account strategically, making extra contributions, renovating wisely, and regularly reviewing your property’s market value, you can steadily increase your equity and improve your borrowing capacity.

Turning that equity into opportunity requires smart planning and the right tax strategy. Every investor’s situation is unique, so before refinancing or using your equity to buy another property, it’s essential to get professional advice.

At Investax, our team specialises in helping property investors structure their loans and investments for long-term tax efficiency and asset protection. Contact Investax today to discuss how our property tax specialists can help you use your equity strategically and move closer to your next investment goal.

An accounting fee paid to a good accountant should be seen as an investment—not a cost. Especially when that fee is 100% tax deductible, it makes sense to work with someone who understands the complexity of property tax. If your current accountant isn’t experienced in investment property matters, maybe it’s time to give Investax a go.

Reference

ATO/Rental Properties – Interest Expenses 

We offer a 15-minute free consultation to discuss your tax, property investment and business needs. Book your complimentary consultation now.

Book Now

General Advice Warning

The material on this page and on this website has been prepared for general information purposes only and not as specific advice to any particular person. Any advice contained on this page and on this website is General Advice and does not take into account any person’s particular investment objectives, financial situation and particular needs.

Before making an investment decision based on this advice you should consider, with or without the assistance of a securities adviser, whether it is appropriate to your particular investment needs, objectives and financial circumstances. In addition, the examples provided on this page and on this website are for illustrative purposes only.

Although every effort has been made to verify the accuracy of the information contained on this page and on our website, Investax Group, its officers, representatives, employees and agents disclaim all liability [except for any liability which by law cannot be excluded), for any error, inaccuracy in, or omission from the information contained in this website or any loss or damage suffered by any person directly or indirectly through relying on this information.