How to Buy Property with No Money Down

Using the equity you’ve gained in your home through paying down the loan principal and/or market gains over time is one of the most common ways to buy an investment property without having to put down a hefty deposit.

Your equity is calculated as the value of your home in today’s market minus any debt secured against your property. For example, if your home is worth $1,000,000 and you have a mortgage of $650,000, you have $350,000 equity.

Your bank will allow you to borrow money against the equity you have gained in your home, usually up to a maximum of 80%, meaning you can release this equity to put towards a deposit on another property.

With current loan to value ratio restrictions imposed on banks, you need a minimum 40% deposit to purchase an investment property that is an existing dwelling (and as little as 10-20% for an investment property that is a new build). If you have sufficient equity in your home to be able to release a 40% deposit, by borrowing the other 60% against the investment property itself, you could fund 100% of the purchase price without putting a cent down.

In addition to equity, you still need to be able to meet loan repayments so the bank will assess your income, expenses and liabilities to ensure you meet bank lending criteria and can comfortably afford the full amount of new debt.